Federal Regulation Support by Kalshi CEO, Prepared for State-Level Battles
In the world of prediction markets, Kalshi continues to navigate a complex legal landscape as it faces challenges from several states over its sports event contracts. Despite these obstacles, the company remains confident in its regulatory status, citing federal preemption and the exclusive jurisdiction of the Commodities Futures Trading Commission (CFTC) over certain prediction markets.
Kalshi's business model is primarily governed by the Commodity Exchange Act (CEA), a federal law that grants the CFTC exclusive authority over certain prediction markets, including those not classified as gaming, lottery, or sports wagering under federal law. This framework allows Kalshi to operate prediction markets across state lines without obtaining state-by-state approval.
However, several states, including Nevada, New Jersey, Arizona, Maryland, Illinois, Montana, and Ohio, have attempted to regulate or block Kalshi's operations, arguing that its contracts constitute illegal gambling or unlicensed gaming. So far, these state regulatory efforts have been largely unsuccessful in courts, thanks to the doctrine of federal preemption.
For instance, in Nevada, after a cease-and-desist order from the Nevada Gaming Control Board, Kalshi filed suit asserting federal preemption, leading to a court granting a preliminary injunction recognizing the CFTC’s exclusive regulatory authority over such markets.
The regulatory status of sports-based event contracts is more complicated. While Kalshi initially took the position that sports event contracts could be classified as games and thus subject to CFTC review, it later introduced sports-related contracts, such as NFL playoffs. The CFTC has expressed reservations and requested the withdrawal of such contracts in some cases.
The regulatory treatment of sports derivatives remains uncertain because of possible additional federal statutes, such as the Wire Act and Illegal Gambling Business Act, which may restrict such contracts despite federal preemption.
Kalshi's ongoing litigation and CFTC actions highlight the evolving balance between federal authority and state gambling regulations in this area. The company, led by CEO Tarek Mansour, maintains that its trading is similar to a financial exchange and is regulated by the CFTC.
Recently, Kalshi hired Sara Slane as head of corporate development. Slane, who previously served as senior vice president of public affairs at the American Gaming Association (AGA), brings a wealth of experience to the table, particularly in the gaming industry. This appointment comes at a time of exponential growth at Kalshi and as the company is looking to expand its relationships with sports leagues and teams.
Despite the legal challenges, Mansour remains optimistic about Kalshi's future. He believes that the CFTC's jurisdiction over Kalshi supersedes any authority the states claim to have, citing federal preemption. However, he also acknowledges that a fight is brewing over the regulation of sports wagering in the US, which could have significant implications for the industry.
In addition to Nevada and New Jersey, regulators in several other states, including Connecticut and Massachusetts, are examining Kalshi's offering of sports event contracts. There is speculation that Washington State could join this list.
As of April 8, 2025, this is the latest update on the ongoing legal battle between Kalshi and several states. Mansour's assertion that Slane's track record speaks for itself, having run the campaign to overturn the federal law banning sports betting, underscores the company's commitment to navigating this complex regulatory landscape.
[1] Source: https://www.cftc.gov/ [2] Source: https://www.american-gaming.org/ [3] Source: https://www.kalshi.com/ [4] Source: https://www.nvcourts.gov/
This article was posted on April 8, 2025, at 02:55h and last updated at the same time.
- The regulatory status of Kalshi's gaming business, particularly sports betting, continues to face challenges from several states, despite the company's confidence in its legal standing under federal preemption and the Commodities Futures Trading Commission's (CFTC) jurisdiction.
- Kalshi's business model, primarily governed by the Commodity Exchange Act, allows the company to operate prediction markets across state lines without obtaining state-by-state approval, but certain sports-related contracts have raised concerns with the CFTC, leading to requests for their withdrawal in some cases.
- In response to these challenges and to strengthen its regulatory relationships, Kalshi recently hired Sara Slane as head of corporate development. Slane's extensive experience in the gaming industry and her previous role in campaigning to overturn the federal law banning sports betting will be vital in navigating the complex regulatory landscape.
