Arizona and North Carolina regulators now monitoring prediction markets
Both state gaming authorities tell EGR North America that they are keeping tabs on a sector that is under increasing pressure across the US over sports event contracts offerings
Arizona and North Carolina’s state gambling regulators are both monitoring developments in the prediction markets sector as regulatory scrutiny continues to ramp up against Kashi, Robinhood, and Crypto.com.
Arizona’s Department of Gaming has disclosed to EGR North America that it is “looking into” the burgeoning prediction markets sector, while the North Carolina State Lottery Commission is “monitoring” legal cases across the US.
Since the start of March, regulators in Nevada, New Jersey, Ohio, and Illinois have all issued cease-and-desist orders to at least one company offering sports event contracts, with Kalshi in the firing line of all four.
Retail brokerage firm Robinhood, which has tapped Kalshi for its technology to power its prediction hub, has also been contacted by authorities in New Jersey, Ohio, and Illinois.
Singapore-based cryptocurrency exchange Crypto.com was also contacted by the Ohio Casino Control Commission (OCCC) and the Illinois Gaming Board (IGB).
The rise in popularity surrounding sports event contracts and prediction markets has drawn the ire of several state regulators since it was first rolled out by Crypto.com just before Christmas.
All of the regulators that have issued pushback of some kind have done so because each believes that the trading of sports event contracts is effectively unauthorized sports wagering.
The prediction markets operators’ stance is that their product is regulated at a federal level by the Commodity Futures Trading Commission, and that the business model is based on peer-to-peer swaps rather than a traditional sportsbook.
The Arizona Department of Gaming said that it is conducting its own research into the matter, though it offered no further comment at the time of writing.
It is a similar story in North Carolina, with the State Lottery Commission noting that it is “monitoring prediction market cases in other jurisdictions.”
The Tar Heel State’s regulator did not reveal which cases, but it is likely in reference to the two court battles between Kalshi and the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (DGE).
After being dealt cease-and-desist orders by both, Kalshi opted to file lawsuits against the regulators, with CEO Tarek Mansour claiming the warnings from the NGCB and DGE “fundamentally misunderstand prediction markets and undermine the foundation of US financial markets, which are regulated by the federal government.”
A court hearing scheduled for April 2 between Kalshi and the DGE was adjourned, but the dispute could conclude by the end of the month.
Kalshi is of the belief that state regulators do not possess the power to regulate sports event contracts, something that currently falls under the CFTC’s remit.
Meanwhile, yesterday, April 3, the Kansas Racing and Gaming Commission (KRGC) said that it “may get involved” in taking action based on the outcome of the court cases, but that it has no plans to issue cease-and-desist orders at this time.
Elsewhere, the Connecticut department of consumer protection’s (DCP) gaming division confirmed that it was looking into Kalshi’s prediction markets offering.
The DCP explained that it has been investigating the exchange since last fall, but did not disclose when the probe would end nor what sort of action it could lead to.
EGR North America has contacted Kalshi, Robinhood, and Crypto.com for comment.