Kalshi Sues Nevada, New Jersey Over Sports Event Prediction Markets

• Kalshi has filed lawsuits against both the New Jersey Division of Gaming Enforcement and Nevada Gaming Control Board
• Both groups levied cease-and-desist notices against Kalshi for their sports event prediction contract markets
• Kalshi believes state commission cannot intrude on government’s “exclusive” authority to regulate prediction markets

Perhaps the courts were always going to have to get involved in the sports event contract market conundrum.

KalshiEX LLC has filed lawsuits against both the New Jersey Division of Gaming Enforcement (NJ DGE) and Nevada Gaming Control Board (NGCB) for cease-and-desist notices sent to the company regarding their sports event prediction markets.

The company believes neither of the state regulatory bodies have the right to intrude on the government’s “exclusive” authority to regulate prediction markets.

Regulated Under Federal Law

The Nevada Gaming Control Board levied a cease-and-desist notice against Kalshi in early March, ordering the company to stop offering its sports event contract markets in the state by March 14.

The New Jersey Division of Gaming Enforcement last week issued its own cease-and-desist against Kalshi and Robinhood on March 27, giving the companies until midnight, March 29, to pull their sports event contract markets from the state.

Robinhood acquiesced to the notice, but Kalshi did not, instead filing lawsuits against both states.

“Kalshi is a federally-designated and approved derivatives exchange, subject to the CFTC’s exclusive jurisdiction. It offers consumers the chance to invest in many types of event contracts, including, as relevant here, sports-outcome contracts. These contracts are subject to extensive oversight by the CFTC, and – critically – they are lawful under federal law. Two months ago, the CFTC allowed Kalshi’s sports-outcome contracts to take effect without review,” Gurbir S. Grewal of Milbank LLP, counsel for Kalshi, wrote in the lawsuit against the NJ DGE.

Counsel argues that Congress previously gave the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction to regulate futures trading on approved exchanges. As the CFTC has allowed Kalshi to launch its sports event contract markets, state law cannot “intrude on the comprehensive federal scheme for regulating designated exchanges.”

Kalshi Co-Founder, CEO Speaks Out

Kalshi Co-Founder and CEO Tarek Mansour recently took to social media to defend the company’s lawsuits against the state regulatory bodies.

“While they are not our regulators, both states have issued cease and desist orders that fundamentally misunderstand prediction markets and undermine the foundation of U.S. financial markets, which are regulated by the federal government. We have made every effort to engage proactively with both Nevada and New Jersey and try to educate them about prediction markets, how they are regulated, and how critical they are… but our words fell on deaf ears,” he wrote.

The CFTC will soon hold a public roundtable on sport event prediction contracts to provide its opinion on the market.