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Prediction market platform Kalshi has filed legal action against the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (NJDGE) after cease-and-desist letters from both state regulators. The cease-and-desist letters called for Kalshi to stop all sports-related contracts within the respective states, citing unauthorized sports wagering operations.
Kalshi argues that its event contracts, by which users are able to wager on the result of different events, are covered by the federal Commodity Futures Trading Commission (CFTC) and hence are beyond the reach of states. The company emphasizes that its platform operates as a two-sided market where participants trade contracts with one another, differing fundamentally from traditional sports betting models where the house sets odds and takes bets.
Kalshi’s co-founder, Tarek Mansour, stated, “Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it once again in a court of law.” The NGCB’s cease-and-desist order also targeted Kalshi’s election-related contracts. However, a U.S. judge ruled in September 2024 that these contracts were legal, permitting them to trade freely across the United States.
On Feb. 4, acting CFTC director Caroline Pham announced a regulatory shift, ending enforcement-driven regulation to focus on fraud prevention. Pham stated the agency would prioritize protecting fraud victims while monitoring other legal violations. Industry firms welcomed the move after a wave of regulatory actions under the Biden administration. That same day, the CFTC launched a probe into Super Bowl event contracts by Kalshi and Crypto.com to assess compliance with U.S. derivatives laws. The agency ultimately took no action against the contracts.
