The New Jersey Department of Gaming Enforcement (NJDGE) has issued cease and desist letters to prediction market Kalshi and financial trading platform Robinhood, ordering both companies to stop offering what the regulator calls "unauthorized sports wagering" in the state.
In the one-page letters sent to Kalshi CEO Tarek Mansour and Robinhood CEO Vlad Tenev on Thursday, NJDGE interim director Mary Jo Flaherty demanded that both companies:
Immediately stop offering sports prediction markets to New Jersey residents
Void all wagers already placed by users in the state
Provide written confirmation of compliance by 11:59 p.m. ET Friday, March 28
"The Division has accessed your mobile application and website, located at www.kalshi.com, and it has determined that your company...is listing unauthorised sports wagers for individuals located within the State of New Jersey," Flaherty wrote in the letter to Kalshi.
"This activity constitutes a violation of the New Jersey Sports Wagering Act, which only permits licensed entities to offer sports wagering to patrons located in New Jersey."
The timing of the letters is notable, as they were issued just hours before the NCAA men's basketball tournament East Regional Sweet 16 matchups began at the Prudential Center in Newark, New Jersey.
The regulator specifically highlighted an alleged violation of New Jersey's constitutional provision that prohibits wagering on college sports events held in the state or involving New Jersey-based teams, regardless of where the games take place.
This restriction has particular relevance as Kalshi and Robinhood recently partnered to offer prediction markets on NCAA tournament games nationwide, including the March Madness matchups being played in Newark.
Both companies issued statements in response to the regulatory action, with Kalshi emphasizing its compliance with federal oversight.
"Kalshi believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission. We look forward to engaging with the state of New Jersey to resolve this matter," a Kalshi spokesperson said.
Robinhood indicated it would comply with the order for NCAA tournament markets while defending the legality of its broader offerings.
"Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner," a Robinhood spokesperson stated. "While we do not believe these contracts run afoul of any state laws, we are no longer allowing New Jersey residents to enter new positions for the Men's and Women's Basketball Tournament event contracts."
The company added that New Jersey residents will still be able to access its prediction markets hub and contracts in other categories.
New Jersey's action follows similar regulatory challenges in other states:
Nevada became the first state to take action against Kalshi earlier this month
Massachusetts Secretary of State's office issued a subpoena to Robinhood seeking information about its sports betting prediction market
Other states are reportedly reviewing the legal status of these platforms
The cease and desist letters highlight the ongoing regulatory tension surrounding prediction markets that allow users to trade on sports outcomes. While these platforms operate under the federal oversight of the Commodity Futures Trading Commission (CFTC), state gaming regulators are increasingly asserting jurisdiction when the activities resemble sports betting.
The regulatory challenges stem from the blurred line between financial trading and sports wagering. Kalshi and Robinhood maintain that their "event contracts" are distinct from traditional sports betting because:
They operate on an exchange model where users trade against each other rather than against a house
Prices reflect market sentiment about the likelihood of specific outcomes
The platforms are regulated by the CFTC as financial exchanges
However, state regulators like the NJDGE view these offerings through the lens of existing sports betting laws, which typically require specific state-level licenses to offer wagering on sports events.
The NJDGE has threatened further legal action if either company fails to comply with the cease and desist orders by the Friday deadline.