Nevada Lawsuit Brings Major Victory for Kalshi
The heat's on Kalshi, the prediction market platform, following its offering of sports event contracts. A handful of states - Illinois, Maryland, Montana, Nevada, and New Jersey - have sent cease-and-desist letters, pressuring the company to stop providing sports event contracts within their boundaries.
CEO Tarek Mansour was straightforward about these letters at last week's StrictlyVC, stating that Kalshi operations aren't subject to state laws. A Nevada judge agreed with this view, ruling that the states can't hinder Kalshi from offering sports event contracts.
In a significant victory, the court argued that because the Commodity Futures Trading Commission (CFTC) has either approved (or yet to disapprove) Kalshi's sports-event contracts, states are barred from taking legal action.
The CFTC has stayed silent on Kalshi's sports contracts since their introduction for the Super Bowl. As a result, Kalshi has expanded its sports event contract offerings, now operating 72 different contracts across various sports like golf, hockey, basketball, soccer, and more.
Acting CFTC chair Caroline Pham has organized roundtables to discuss prediction markets, but a conclusion has yet to be reached. This will likely wait until a permanent chair is appointed. Trump selected Brian Quintenz, a former CFTC chair and Kalshi board member, as the nominee.
States initially thought Kalshi's sports events contracts were sports gambling disguised as something different and sought to plug the regulatory loophole via cease-and-desist letters. Keep in mind that the 39 states that have legalized sports gambling have poured a lot of political capital into debating and finalizing sports gambling regulations since the fall of PASPA in 2018.
Missouri is the latest state to join this club, having legalized sports gambling after numerous failed attempts. A 2024 constitutional amendment barely scraped through, with 50.5% support.
But Kalshi's arrival has dismantled everything they've worked for. If you're a supporter or opponent, it's a demoralizing situation. Legalizing sports gambling promised a regulated industry providing millions in state taxes and funding for state-level problem gambling programs.
This is another major legal triumph for Kalshi. The first victory came against the CFTC in 2024, when a D.C. court declared Kalshi's political event contracts neither illegal nor gaming and that the federal regulator couldn't prevent the company from offering those products. This decision could work in Kalshi's favor regarding sports contracts, as states claim they're nothing more than sports betting by another name. However, the D.C. court has declared Kalshi's offerings are not gaming, making it tempting to anticipate a CFTC ruling in Kalshi's favor.
- The controversy surrounding Kalshi, the prediction market platform, has escalated, with Illinois and other states issuing cease-and-desist letters over sports event contracts.
- Despite the legal pressure, Kalshi's CEO, Tarek Mansour, asserted that state laws do not apply to the company's operations.
- In a court ruling, a Nevada judge supported this view, stating that states cannot impede Kalshi from offering sports event contracts.
- The Commodity Futures Trading Commission (CFTC) has remained silent on Kalshi's sports contracts, allowing the platform to expand its offerings across various sports like golf, hockey, basketball, soccer, and more.
