Kalshi, a prediction market platform, has filed lawsuits against gaming regulators in Nevada and New Jersey following demands to halt its sports-event contracts.
Lawsuit Against Nevada and New Jersey
In March 2023, Nevada and New Jersey issued cease-and-desist orders, considering Kalshi to be operating as an unlicensed sports betting operator. Nevada accused Kalshi of managing an 'unlicensed sports pool', while New Jersey referenced its Sports Wagering Act, which limits actions to state-licensed operators.
Kalshi's Arguments and Position
Kalshi argues that its event contracts are financial derivatives, not bets, and are federally regulated. The company believes that the states' actions interfere with federal regulation. Kalshi's CEO, Tarek Mansour, frames this legal battle as a broader fight for innovation and regulatory clarity.
Federal and State Conflict
The core issue is whether event-based trading should be classified as gambling or federally-regulated financial trading. Kalshi operates as a designated contract market under CFTC supervision, asserting that its event contracts function like two-sided markets rather than bookmaker-driven wagers. The CFTC has advocated for legal clarity and has not acted against Kalshi's Super Bowl contracts in the past.
Kalshi continues to fight for the right to operate under federal law, indicating the need for legal clarity regarding prediction markets. This case highlights the complex dynamics between state and federal regulators.
