Kalshi files lawsuits against Nevada and New Jersey regulators

Kalshi has taken legal action against state regulators in both Nevada and New Jersey in response to cease-and-desist letters sent to the prediction platform in both states. 

As confirmed by CEO Tarek Mansour on X yesterday (30 March), Kalshi has filed lawsuits against the Nevada Gaming Control Board (NGCB) and New Jersey’s Division of Gaming Enforcement (DGE) over claims that the exchange is offering what is effectively unlicensed sports wagering in the form of sports event contracts. 

The vertical has been rolled out to those aged 18 and over in all 50 US states, enabling users to trade contracts on how likely they view the outcome of real-world events, including certain sporting contests.

In turn, both the NGCB and DGE have pushed back, arguing that the product circumvents relevant requirements to offer a sports gambling product in their respective markets. 

Kalshi’s reply focuses on the fact that its contracts are regulated at federal level by the Commodity Futures Trading Commission (CFTC), rather than falling under the remit of any state-level authority. 

The exchange, which rose to prominence after offering event contracts on the most recent US presidential election, has noted that the cease-and-desist orders do not take into consideration that Kalshi’s model is peer-to-peer swaps, rather than the traditional sportsbook model of a player taking on the house. 

Mansour took to social media to claim that within the last decade “objective truth has been dangerously eroded by aggressive politicisation, rampant misinformation and biased journalism”, with the Kalshi chief executive arguing prediction markets have proven to be the “antidote.” 

Having issued a rally cry regarding prediction markets and arguing that the service is needed now more than ever, Mansour shed light on his interactions with the NGCB and DGE. 

“While they are not our regulators, both states have issued cease-and-desist orders that fundamentally misunderstand prediction markets and undermine the foundation of US financial markets, which are regulated by the federal government,” Mansour wrote. 

“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.  

“I can’t speak to why they are taking this action, but prediction markets have proven their use, so it is a shame that these authorities are still trying to censor them. We are left with no choice: sue.” 

Nevada was the first to state to publicly oppose Kalshi’s sports event contracts earlier this month, outlining that offering contracts on sporting events and election outcomes is unlawful, “unless and until approved as licensed gaming by the Nevada Gaming Commission.” 

That cease-and-desist order was met with defiance from Mansour, who insisted that Kalshi would “keep marching” despite the growing regulatory scrutiny on the burgeoning sector. 

Weeks later, the DGE became the second authority to set its sights on Kalshi, issuing its own cease-and-desist letter, while also sending one in the direction of retail brokerage firm Robinhood for its own sports contract offering. 

In that instance, the DGE called for all contracts traded by New Jersey residents on both platforms to be voided. 

In February, Robinhood tapped Kalshi to provide contracts for its Robinhood Derivatives arm, with a view to launching event contracts for the Super Bowl later that month.

The firm eventually had to remove its Super Bowl event contract market 24 hours after launch following intervention from the CFTC.

Robinhood returned to the event contracts space with markets for March Madness housed on a dedicated hub within its app.