Prediction market platform Kalshi has escalated its battle with state gaming regulators by filing federal lawsuits against both the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (DGE) after receiving cease and desist orders from both agencies.
Rather than comply with the state regulators' demands to stop offering sports prediction markets, Kalshi's lawsuits argue that both states are overstepping their authority and infringing upon the company's federally granted right to offer event contracts.
"This action challenges the state of New Jersey's intrusion into the federal government's 'exclusive' authority to regulate futures derivatives trading on exchanges overseen by the Commodity Futures Trading Commission (CFTC)," the company stated in its complaint.
Invoking the Supremacy Clause of the U.S. Constitution, Kalshi argues that Congress has the exclusive right to regulate platforms like itself through the CFTC, and that this federal authority supersedes state gaming laws.
The legal battle centers on whether Kalshi's sports-related prediction markets constitute gambling or financial trading. Kalshi contends its platform differs fundamentally from traditional sportsbooks because:
It operates as a two-sided market where users trade contracts with each other
Prices are determined by market forces rather than a bookmaker
The platform operates under CFTC oversight as a designated contract market
"We have been targeted before, we have fought before, and we have won before. This time will be no different," said Kalshi CEO Tarek Mansour. "The threatened actions in 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 markets for decades."
The legal battle comes amid substantial trading volume on Kalshi's platform. According to the company's website, approximately $323 million worth of contracts for the men's NCAA Tournament and $56.3 million for the women's NCAA Tournament had been traded nationwide as of Monday morning.
Earlier this month, Kalshi expanded its sports offerings for March Madness, triggering the regulatory actions from Nevada and New Jersey. The latter state specifically prohibits wagering on collegiate events occurring within its borders, which became an issue when NCAA tournament games were held in Newark.
The jurisdictional dispute has now spread to a third state, with the Ohio Casino Control Commission issuing its own cease and desist letter on Monday to Kalshi, Crypto.com, and Robinhood.
"The commission determined the event contracts offered by the companies on sporting events meet the definition of sports gaming under the law, which requires licensure to be legally offered in Ohio," the Ohio regulator stated.
Kalshi noted in its legal filings that it met with New Jersey regulators several times over the past week attempting to reach a compromise without success. The company also raised technical concerns about geofencing specific markets and suggested that ceasing operations in certain states could potentially threaten its status with the CFTC.
In a LinkedIn post explaining the decision to file the lawsuits, Mansour characterized prediction markets as more than simply places to trade contracts, calling them "quintessential truth machines" that "mobilise the most elegant and effective properties of free financial markets towards the pursuit of unbiased truth."
The New Jersey DGE has agreed to extend the deadline for compliance with its cease-and-desist letter to April 7, but the agency has threatened further action if Kalshi doesn't comply, including "any measures available under state law."
Given Mansour's promise to "continue fighting in favor of predictive markets for the betterment of the American public," observers expect Kalshi will likely file a similar lawsuit against Ohio regulators.
The company's lawsuits seek declaratory and injunctive relief to prevent the state agencies from enforcing their orders, including an emergency temporary restraining order to "avoid immediate and irreparable harm that would result from the defendants' unlawful acts."