Not long ago, excitement built around the launch of Kalshi, a federally regulated online prediction market hub and financial exchange where users can trade on the outcome of events ranging from March Madness to political races.
Now, the platform that had partnered with Robinhood is under fire in several states throughout the country – and it appears the flames are continuing to grow.
The latest instance came from Ohio, where gaming regulators issued a cease-and-desist letter to Kalshi, as well as partner Robinhood and Crypto.com, demanding the operator to close up shop after accusing the firm of offering prediction markets that violate state laws.
“Plainly stated,” the Ohio Casino Control Commission (OCCC) wrote, “Kalshi is operating online sports betting.”
OCCC: Kalshi shows ‘flagrant disregard’ of state laws
The letter cited a number of laws and statutes that Kalshi has violated in Ohio, including offering sports betting despite not being licensed by the state. What’s more, the OCCC emphasized, users only need to be 18 years old to trade on Kalshi, calling this “a flagrant disregard of Ohio’s statutory gambling age limit,” which is 21.
Matthew Schuler, executive director of the OCCC, said in a statement that trading on Kalshi, Robinhood or Crypto.com “is no different than placing a bet through a traditional sportsbook.
“The only difference is that these event contracts do not have the consumer protections required under Ohio law and are accessible to Ohioans under 21 years of age.”
As the commission put it: “Kalshi is trying to act like a regulated, licensed sportsbook.” As a result, the OCCC said, Kalshi could be subject to “criminal sanctions” do not exit Ohio by April 14.
Ohio became the third state regulator to target Kalshi, following in the footsteps of Nevada and New Jersey.
Nevada, New Jersey opened gates of C&Ds
Nevada first issued a cease-and-desist letter to Kalshi in early March, dubbing the platform’s portfolio of sports and election markets “unlawful … until approved as licensed gaming” by state regulators. Shortly after, New Jersey did the same, adding Robinhood to the group.
Then, Massachusetts entered the chat, with Secretary of State Bill Galvin opening an investigation into Robinhood’s sports contracts and issuing a subpoena to the company. Galvin went so far as to call those markets a “gimmick from a company that’s very good at gimmicks.” Yesterday, Connecticut’s gaming division made public that it did the same last fall.
While Robinhood has pulled its college markets in New Jersey, Kalshi has already shown it’s not willing to sit on its hands.
Kalshi fires back with lawsuits against Nevada, NJ
Late last week, the firm filed lawsuits against both the Nevada Gaming Control Board and the New Jersey Department of Gaming Enforcement, also requesting a temporary restraining order (TRO). The group argued that Nevada is “unconstitutionally threatening” to prohibit the trading of Kalshi’s event-based contracts, adding that regulators’ attempt to regulate trading on a federally regulated exchange “is preempted by federal law.”
The Commodity Exchange Act, Kalshi said, created a federal framework for regulating commodity futures trading. Because of this, a federal agency garners the “‘exclusive’ power” to oversee such exchanges. In doing so, it would prevent the “chaos” that would stem from futures trading having to adapt to “conflicting state laws.”
A restraining order, Kalshi argued, is required to allow the firm to avoid irreparable harm. If Kalshi “bows” to these states and attempts to comply with state laws, “it will incur massive and irrevocable economic costs, impose significant harms on users with investments on the platform, imperil its federal registration, and undermine the public’s confidence in the integrity of its platform.”
“I can’t speak to why they are taking this action,” Tarek Mansour, CEO of Kalshi, wrote in a LinkedIn post, “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.”
Where things stand for Kalshi vs. states
Nevada has scheduled a TRO hearing for April 8, while New Jersey has elected to move forward to the next step.
Both Kalshi and NJ Attorney General Matthew Platkin agreed that a TRO is not necessary, as reported by US gaming law attorney Daniel Wallach on LinkedIn. As such, the case will move straight to the preliminary injunction motion. This pushes that cease-and-desist deadline to April 30.
Mansour told The Closing Line that the actions taken by Nevada and New Jersey “seek to undermine not just Kalshi’s contracts, but the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities for decades.”
Calling prediction markets “a critical innovation of the 21st century,” Mansour emphasized his firm’s readiness to defend it in court.
“We have been targeted before,” Mansour said, “we have fought before, and we have won before. This time will be no different.”
