Summary
- Kalshi is challenging the gambling regulator in Maryland.
- The company is confident in achieving another legal victory.
- Regulators still have numerous strategies to challenge Kalshi.
In recent months, the prediction markets platform Kalshi has faced mounting pressure, yet has remained resilient. Despite challenges in several states, Kalshi has taken a proactive approach, successfully challenging the Nevada Gaming Control Board in court. The firm obtained a temporary injunction against a prior cease-and-desist order, allowing it to continue offering its sports future-event contracts.
Kalshi challenges another gambling regulator in the courts, in Maryland
History might be repeating itself as the platform is now challenging the Maryland Lottery and Gaming Commission. The commission issued Kalshi a cease-and-desist letter, alleging that its offerings are indistinguishable from placing a sports wager. Kalshi strongly disputes this claim, arguing that its prediction markets fall under the oversight of the Commodity Futures Trading Commission (CFTC) rather than gambling regulators. The company is also contesting similar actions from the New Jersey Division of Gaming Enforcement, though a decision on this matter is pending. Kalshi asserts that only the CFTC has the authority to define prohibited prediction markets. Additionally, Kalshi emphasizes that it does not set odds, differentiating itself from gambling companies like DraftKings or FanDuel. Despite this stance, Kalshi is contending with several state regulators, including those in Illinois, Michigan, Montana, Ohio, Connecticut, Kansas, and Washington, all of whom have issued cease-and-desist letters. The partial victory in Nevada does not necessarily indicate how these challenges will unfold, as concerns grow over the interpretation of the Wire Act to Kalshi's disadvantage. A significant hurdle is the Wire Act's potential ban on the interstate transmission of data, which could jeopardize Kalshi's business model. Unlike traditional oddsmakers who operate state-specific entities, Kalshi collects its data in aggregate.
The Wire Act and the ongoing assault against Kalshi
Does the Wire Act actually apply to Kalshi? This is a new area for regulators to explore. Although there has been little activity in Nevada, a temporary injunction doesn't equate to Kalshi silencing all critics. Regulators may attempt to demonstrate that Kalshi cannot operate in the state. Meanwhile, DraftKings, a traditional sports betting platform, initially considered launching its own prediction platform but may now be having second thoughts. Kalshi has shown that its platform strongly appeals to younger sports bettors, who are willing to switch to prediction markets if they find the product more engaging.
