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A high-stakes legal battle over the expansion of sports-event prediction markets continues with more states pushing back, and Kalshi’s chief executive insists those efforts are the result of disgruntled casino operators.
The Maryland Lottery and Gaming Control Commission became the latest state regulator to send Kalshi, as well as Robinhood and Crypto.com, a cease-and-desist letter ordering the company to halt its offering of sports-event contracts in the state, joining Nevada, New Jersey, Ohio and Illinois on the list of states that have done so.
Meanwhile, Kalshi co-founder and CEO Tarek Mansour also revealed that another regulator, the Montana Department of Justice Gambling Control Division, sent Kalshi a cease-and-desist on March 26, or one day before New Jersey sent its letter.
In a statement issued Monday (April 7), Maryland Lottery and Gaming director John Martin said that the commission views the issue as “a legal matter and a consumer protection matter, and there is also a fiscal interest for the state”.
“Each of Maryland’s legal sports wagering operators completed a rigorous licensing process and is subject to extensive regulations that include responsible gaming requirements,” Martin said. “The commodity traders aren’t bound by those same guardrails. They’re conducting sports wagering without a license, and in doing so, they’re avoiding the collection of sports wagering taxes that legal operators pay to the State.”
In an interview with TechCrunch, Mansour said that the impact on incumbent commercial gaming interests was the driving force behind the state pushback against Kalshi and other prediction markets.
“The real reason why states are kind of sending us these cease-and-desists is because there's a massive casino lobby that's unhappy about this,” he said. “The core of why we're not necessarily very concerned is we are regulated the federal level.”
The company has maintained in public comments and filings through its lawsuits against Nevada and New Jersey regulators that federal law and regulation by the Commodity Futures Trading Commission (CFTC) preempts that of state gaming regulators, and that the company does not need to be licensed in states to offer its product.
“It's literally the same thing as if states woke up one day and, you know, sent a cease-and-desist to the New York Stock Exchange saying, 'Hey, wagering on something that is outside of your control to make more money requires you to have a gaming license in my state',” Mansour said. “Now that New York Stock Exchange has to get 50 state licenses do their business.”
“We just don't fall under that model,” he said. “We are literally a financial exchange.”
The U.S. casino lobby is indeed frustrated and concerned by sports-based prediction markets, and casino trade organizations in both Nevada and New Jersey backed the actions of their state regulators in new comments filed with the CFTC.
“Elected officials in 40 jurisdictions decided to legalize sports wagering and are now experiencing the benefits of a legal regulated sports betting market that Nevada has long known,” wrote Virginia Valentine, director of the Nevada Resort Association. “However, this strict state-run regulatory system is dramatically undermined by the sports events contracts currently being offered by CFTC regulated entities.
“By offering a nationwide betting product without any regulatory guardrails or consumer protections, the citizens of Nevada will be put at risk and our state’s largest economic driver will be damaged.”
Mark Giannantonio, president of the Casino Association of New Jersey as well as president and CEO of Resorts Casino Hotel, highlighted the policy choices that New Jersey had made in implementing consumer protections for sports wagering.
“As the [CFTC] reviews these contracts, we ask that you respect the policy decisions made by New Jersey citizens, legislators, and regulators and not allow for sports-event contracts to be offered,” he wrote.
For his part, Kalshi's Mansour argues that, historically, all forms of innovation in financial exchanges are viewed with skepticism.
“There hasn't been a single financial derivative that has been set up in the U.S. or otherwise that hasn't been called gambling at the beginning, like it's consistently the same thing,” he said.
