A total of 34 state authorities have joined the battle against Kalshi over the company’s sports event contracts.
The states, along with the District of Columbia and the Northern Mariana Islands, filed an amicus brief to the court of New Jersey, where there is an ongoing legal battle between Kalshi and the state.
As reported yesterday, a brief was also filed by the Indian Gaming Association (IGA), which has been signed by groups representing hundreds of tribes across the US. A further brief has been filed by the American Gaming Association (AGA) opposing the expansion of Kalshi’s sports markets.
Like the brief filed by the IGA, the document filed on behalf of the 34 states notes that Kalshi has been offering sports betting outside state regulation.
It states, “Stripping away the semantics, this case most directly concerns gambling on sports. In 2018, the Supreme Court held that Congress could not bar the States from authorizing sports betting.
“Most States have since legalized the practice. In these States—and even in other States that have not legalized sports betting, like California and Texas—companies such as Kalshi now offer online sports betting through events contracts on the futures marketplace. Kalshi itself has called what it does “sports betting.”
Kalshi betting ads used against them
Kalshi has argued in court that it does not offer betting, but the briefs note the times Kalshi has used the term in its own advertisements, highlighting an ad which states, “Betting on Kalshi: the first app for legal sports betting in all 50 states”.
“Thus, Kalshi’s own words betray its this-is-not-gambling position,” says the brief. Ads that show Kalshi promoting legal betting in states that have not yet legalized sports betting are highlighted, namely California and Texas. Interestingly, California and Texas are two of the states that have not signed on for the fight.
Several other states that have not legalized sports betting have signed on, however, including Alabama, Hawaii, Idaho, Minnesota, South Carolina, and Utah.
CFTC not equipped to oversee Kalshi’s markets
In addition to claiming it does not offer betting, Kalshi’s legal cases have also focused on the company being regulated at the federal level by the Commodity Futures Trading Commission (CFTC). The brief filed by the AGA argues that the CFTC is not equipped to deal with this regulatory role.
It notes, “Given the particular expertise and commitment of resources necessary for effective oversight of sports-betting markets, AGA is concerned that the Commodity Futures Trading Commission (“CFTC”) is not equipped to carry out the regulatory role traditionally played by state governments.”
Under the Trump administration, the CFTC has taken a backseat as Kalshi and other prediction market platforms, such as Crypto.com, have expanded into sports markets. Unchecked by the regulator, the companies have been allowing users to predict (or bet on) NBA, NHL, NFL, and MLB matches. Kalshi continues to promote itself as legal betting and ran an ad during the NBA Finals featuring live odds on both teams, as well as odds on a US alien invasion.
The case between Kalshi and New Jersey
The briefs have all been filed in the case of Kalshi v Flaherty in the US Court of Appeals. Mary Jo Flaherty is the Interim Director of the New Jersey Division of Gaming Enforcement (NJDGE).
The NJDGE initially sent Kalshi a cease-and-desist letter back in March, citing the company as in violation of New Jersey sports betting laws. Kalshi responded by filing a lawsuit against Flaherty and the NJDGE. A judge then ruled in Kalshi’s favor, granting the company a preliminary injunction that allows the platform to continue operating in New Jersey.
The NJDGE appealed that decision and the case is now in the court of appeals. If the Third Court upholds the decision, it could establish a precedent that CFTC-regulated event contracts cannot be blocked by state gambling laws. A reversal of the decision could alternatively force Kalshi to modify its markets to satisfy state laws, or else apply for state gambling licenses.
With more than half of all US states joining the fight against Kalshi, it adds a lot of pressure on the judges in the case. However, a ruling is not expected any time soon and could take as long as a year. During that time, Kalshi will undoubtedly continue to push the boundaries of what it is legally acceptable.
Prediction markets a beacon for truth
Kalshi CEO Tarek Mansour shows no sign of backing down. When filing the lawsuit in New Jersey, Mansour posted on X, “Prediction markets have proven themselves to be the antidote. They mobilize the most elegant and effective properties of free financial markets towards the pursuit of unbiased truth.
“They are the quintessential truth machines. With trust in traditional institutions at an all-time low, people are turning to prediction markets at an astronomical pace. The growth of the ecosystem in the last year is a testament to how important they have become to the American people.
“We need prediction markets… now, more than ever.”
It would seem there are plenty who disagree and most state authorities as well as tribal leaders are firm in their belief that they do not need prediction markets.
Adam is an experienced writer with years of experience in the gambling industry. He has worked as a content writer and editor for five years on sites such as Oddschecker, CoinTelegraph and Gambling Industry News, bringing excellent knowledge of the world of sports betting and online gambling. Adam focuses on emerging stories in the ever changing landscape of betting in the US. Read the latest on prediction markets, changing legislation, and sweepstakes.
