Kalshi’s Model Is Forcing a Government Rethink on Gambling

• Kalshi is suing multiple states, arguing its event contracts are federally regulated derivatives, not gambling.
• Federal judges in Nevada and New Jersey have sided with Kalshi in early rulings.
• The CFTC dropped its appeal over Kalshi’s election markets, signaling a regulatory shift.
• States like Illinois and Tennessee continue to push back, citing integrity and licensing concerns.
• Kalshi’s rapid growth and high-profile advisors point to a growing influence in sports betting policy.

WASHINGTON – The battle over the legality and jurisdiction of event contracts tied to sports outcomes has intensified. A wave of lawsuits, cease-and-desist orders, and regulatory shifts are reshaping the future of prediction markets in the United States.

Kalshi has found itself at the center of a widening dispute between state gaming regulators and the Commodity Futures Trading Commission (CFTC). Since March, the company has filed lawsuits against state regulators in Nevada, New Jersey, and Maryland, challenging state attempts to classify its sports-related event contracts as illegal gambling.

In each case, Kalshi argues its legal sports betting contracts fall squarely under CFTC jurisdiction as financial derivatives, not as traditional sports wagers. Unlike legal online sportsbooks, Kalshi offers a two-sided market where users speculate on yes/no outcomes, ranging from elections to sports results and weather, without a house setting odds.

The legal tension reached a pivotal moment in April, when a federal judge granted Kalshi a preliminary injunction in its case against the Nevada Gaming Control Board, blocking the state’s attempt to shut down its operations. A similar ruling in New Jersey soon followed, signaling a judicial willingness to accept Kalshi’s argument that these contracts are not governed by states with legal sports betting but rather federal commodities law.

Going Federal

At the federal level, the regulatory tide also appears to be turning in Kalshi’s favor. On Monday, the U.S. Court of Appeals for the D.C. Circuit officially dismissed the CFTC’s appeal in a separate case involving election-based contracts.

The CFTC had initially challenged a September 2024 ruling that blocked the agency from banning Kalshi’s election markets via a public interest review. The 3-0 decision by the CFTC to withdraw its appeal, paired with Kalshi’s agreement to drop all related legal claims, effectively cleared the way for US sports betting laws supporting the broader use of event contracts on U.S. elections.

Behind the scenes, the CFTC itself appears to be shifting course. Under Acting Chair Caroline Pham, and with former commissioner Brian Quintenz nominated to the permanent post, the agency has backed off enforcement efforts. This includes canceling an April roundtable meant to assess sports-related event markets – a sign that the agency may be reassessing its role amid legal setbacks and political pressure.

More States Jumping On The Case

Still, resistance from state regulators and the sports betting industry is mounting. States including Illinois, Ohio, and Montana have issued cease-and-desist orders to Kalshi and similar platforms, claiming their sports contracts constitute unlicensed betting. Meanwhile, Tennessee’s Sports Wagering Council has formally urged the CFTC to ban such platforms entirely, citing regulatory non-compliance.

Even without litigation, these state actions reflect deep unease with the blurring lines between financial derivatives and sports gambling.

Industry stakeholders are also pushing back. Leagues like the NBA and MLB have submitted formal objections to the CFTC, warning that unregulated sports prediction markets could undercut state-regulated sports betting and lead to integrity concerns.

Despite the backlash, Kalshi’s market presence is growing. In April, it reported $86 million in trading volume during The Masters golf tournament alone. The platform’s recent hire of Donald Trump Jr. as a strategic advisor and its ties to high-level policymakers have further fueled perceptions that Kalshi is on a trajectory to redefine the history of sports betting in the US, specifically for event-based speculation.

As legal and regulatory battles continue, the clash between state gambling sovereignty and federal commodity regulation is fast becoming a defining issue. The outcome could determine not only the fate of platforms like Kalshi but also the broader boundaries between betting, finance, and public policy.