Pressure has been mounting on prediction market Kalshi after it began offering sports event contracts on its platform. At least six states - Illinois, Maryland, Montana, Nevada, and New Jersey - have threatened legal action with cease-and-desist letters requesting the company stop offering sports event contracts in their jurisdictions.
The company sued Nevada and New Jersey, stating their contracts were perfectly legal. CEO Tarek Mansour was blunt about these letters when speaking at last week's StrictlyVC, saying: “The state law doesn’t really apply [to Kalshi].”
On Thursday, a Nevada judge agreed, ruling that states cannot bar the company from offering sports event contracts. Again, big win.
States Barred From Legal Action...For Now
Nevada District Court Judge Andrew Gordon ruled that because the CFTC has "approved (or not yet disapproved)" Kalshi's sports-event contracts, states are barred from legal action against the company for offering those contracts.
The CFTC has been silent on Kalshi's new even contracts since they started offering them for the Super Bowl. With that silence, Kalshi has expanded its sports event contract offerings with 72 different sports contracts on everything from golf to hockey, basketball, and soccer.
Under acting CFTC chair Caroline Pham, the federal regulator has enacted roundtables to discuss prediction markets but hasn't made any conclusions. That will likely have to wait until a permanent chair is named. Trump picked Brian Quintenz, a former CFTC chair and Kalshi board member, for the role.
Quintenz's nomination was sent to the Senate's Committee on Agriculture, Nutrition, and Forestry on February 11, 2025, but a hearing date has yet to be scheduled.
Why Are States Going After Kalshi?
States believed Kalshi's sports events contracts were sports gambling products by another name and sought to close the regulatory loophole with cease-and-desist letters.
Remember, the 39 states that have legalized sports gambling have spent a lot of political capital debating and negotiating sports gambling regulations after the fall of PASPA in 2018.
That process wasn't always straightforward or widely welcomed in some cases. Missouri is the latest state to legalize sports gambling after years of failed attempts. A 2024 constitutional amendment passed by the narrowest of margins, with 50.5% support.
Kalshi has now undone all of that work. Which must be deflating for supporters and opponents. Passing sports gambling laws promised a regulated industry that would pay millions in state taxes and provide necessary funding for state-level problem gambling programs.
Another Legal Win For Kalshi
This is yet another major legal win for the company. The first came against the CFTC in 2024 when a D.C. court agreed that the company's political event contracts were neither unlawful nor gaming and that the federal regulator could not stop the company from offering those products.
That verdict could prove beneficial in the context of sports event contracts. Again, the main argument from states against Kalshi is that their sports contracts are sports gaming by another name. But per the D.C. court, Kalshi's offerings are not gaming. It's easy to see a world where the CFTC sides with Kalshi vs states.
