Prediction Market Platform Challenges State Regulators Over Sports Betting Dispute

Kalshi, a prediction market platform, has taken legal action against the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement

Kalshi, a platform for prediction markets, has filed lawsuits against the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement.

Both state regulators had issued cease and desist orders to Kalshi to stop offering its sports-related contracts in the respective states. However, Kalshi maintains that these contracts fall under the Commodity Futures Trading Commission’s (CFTC) jurisdiction.

According to Kalshi’s legal team, state-level regulators are not empowered to intervene.

“No state agency, regulator, department, or commission has authority to regulate, or to apply for judicial review of any action of the Commission [CFTC] with respect to any commodity code,” a portion of Kalshi’s lawsuit reads.

The statement is a direct quote from the Commodity Exchange Act. Kalshi’s legal team highlighted this point in its lawsuit.

Kalshi’s event contracts are two-sided markets and function as swaps, in contrast to the traditional sports betting models where the house has an edge.

“We are committed to defending the important role of prediction markets as a valuable financial innovation,” said Kalshi co-founder Tarek Mansour.

Earlier this year, the Nevada Gaming Control Board also issued a cease and desist order to Kalshi to halt its political and economic prediction market contracts in the state.

These contracts allow users to trade on the outcome of events such as US presidential elections. A US judge ruled that Kalshi’s election contracts are legal and can continue trading in the country.

The CFTC has adjusted its approach under new leadership. Acting director Caroline Pham announced that the agency would no longer concentrate on regulation through enforcement actions. Instead, the agency would prioritize the fight against fraud.

“The best way to serve the public interest is not through the threat of litigation, but rather through clear rules and guidance that promote innovation while safeguarding market integrity,” said Pham.

This shift in strategy has been welcomed by the industry, which has faced a series of lawsuits and enforcement actions during the current administration.

Despite examining Kalshi’s Super Bowl event contracts with Crypto.com, the CFTC ultimately decided not to take any action to ban the contracts.