New Jersey’s gambling regulator has made a move on Kalshi and Robinhood, sending a cease-and-desist letter to each platform in an attempt to force them to stop offering sports event contracts in the state.
The New Jersey Division of Gaming Enforcement (DGE) wrote to both prediction market providers to accuse them of offering “unauthorized sports wagering,” as first reported by Dustin Gouker’s The Closing Line on Thursday.
In letters addressed to Kalshi CEO Tarek Mansour and Robinhood CEO Vlad Tenev and viewed by SBC Americas, DGE Interim Director Mary Jo Flaherty said that Kalshi and Robinhood offering contracts on sports such as March Madness constitutes a violation of the New Jersey Sports Wagering Act.
In particular, Kalshi is offering sports contracts to New Jersey residents on collegiate sporting events that are taking place in New Jersey. The Garden State expressly forbids betting on in-state college games or contests involving any New Jersey college team. As a result, licensed sportsbooks in the state cannot offer such markets.
One of the four locations for March Madness games this weekend is the Prudential Center in Newark, NJ. Accordingly, New Jersey bettors are not allowed to wager on those games at New Jersey sportsbooks but could buy contracts on the games through Kalshi and Robinhood.
“The Division demands that you immediately cease and desist from offering any form of sports wagering to New Jersey residents and void any such wagers already placed,” wrote Flaherty.
In a statement to SBC Americas, a Kalshi spokesperson said that the company “believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission.” The spokesperson added that the company “look forward to engaging with the state of New Jersey to resolve this matter.”
The letters dated March 27 gave each company a very short deadline of 11:59 p.m. ET on Friday, March 28 to comply. SBC Americas also reached to Robinhood but had not heard back at the time of writing.
Kalshi and Robinhood working together on sports
This month, Kalshi introduced March Madness contracts that resemble single-game betting markets in all 50 states, whether or not those states have legalized sports betting.
Last week, Robinhood announced a new prediction markets hub wherein customers across the U.S. can trade on a range of events contracts supplied by Kalshi, including sports. The companies were set to work together on Super Bowl markets before the Commodity Futures Trading Commission (CFTC) demanded Robinhood stop offering its sports contracts.
In its statement unveiling its new hub on March 17, Robinhood said it has been “in close contact with the CFTC over the past several weeks” before launching its sports contracts.
Kalshi has taken around $250 million worth of trading on March Madness contracts through the first two rounds of the NCAA tournaments.
States beginning to mobilize
New Jersey is not the first state to take enforcement action against prediction market operators for their sports offerings.
Earlier this month, Nevada sent Kalshi a C&D that alleged the firm was violating numerous Nevada statutes and gaming regulations. The Nevada Gaming Control Board (NGCB) subsequently granted Kalshi’s request for a “limited period of additional time.” The NGCB had initially asked for a response by March 14.
Also last week, Massachusetts Secretary of State Bill Galvin subpoenaed Robinhood, seeking details on how many customer accounts in the Bay State had been used for trading on college sports contracts. A response is due by April 3, Galvin’s office told SBC Americas.
A CFTC statement supplied to Reuters said that, “at this time, the CFTC has no legal justification to prevent Robinhood from offering access to these contracts, which are listed on a CFTC-registered exchange.”
