After gaming regulators in both Nevada and New Jersey took action against Kalshi, alleging its sports prediction markets are tantamount to sports betting, the financial trading company is fighting back.
Rather than accomodate cease and desist requests from the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gamine Enforcement (DGE), Kalshi has filed federal lawsuits in both Nevada and New Jersey claiming the regulators are overstepping their powers and infringing upon the company’s federal 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 complaint argued.
- “Two New Jersey agencies—the New Jersey Division of Gaming Enforcement and the New Jersey Casino Control Commission—are threatening to intrude on the comprehensive federal scheme for regulating designated exchanges.”
The complaint argues that Congress exclusively has the right to confer and control event contract platforms such as Kalshi. Invoking the Supremacy Clause, Kalshi says the federal ability of Congress to control and regulate the CFTC supercedes state gaming laws.
Within the New Jersey complaint, Kalshi noted it met with regulators several times over the past week to try to reach some sort of compromise with no progress. Kalshi also questioned the ability to geofence out specific markets on its platform froma technological perspective. Moreover, it suggested ceasing to operate in some states could threaten its status with the CFTC.
“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. “
Kalshi began offering sports-related event contracts in January during the lead-up to the Super Bowl. It expanded the scope of sports event contracts in advance of March Madness. Nevada sent a cease and desist letter to Kalshi at the start of March, while New Jersey sent its request last Friday when it became clear Kalshi was taking prediction market action on March Madness games taking place in Newark. New Jersey sports betting law specifically prohibits wagering on events taking place within the state, so state sportsbooks were not allowed to take wagers on those games.
