Ohio gaming regulators are the latest group to be sued by financial firm Kalshi over the group’s stance on sports-related event contracts.
In the suit, filed U.S. District Court for the Southern District of Ohio, Kalshi is suing the Ohio Casino Control Commission (OCCC) and the state’s Attorney General for “threatening to prohibit trading of event contracts.”
Kalshi says Ohio can’t threaten its potential partners
Kalshi also called out the OCCC for its warning to gaming license holders that, if they partner with a firm like Kalshi, even if the deal does not include Ohio, the company runs the risk of losing its state gaming license. The suit says this behavior is illegal and threatens existing and future business partnerships for the company.
“These threats are designed to regulate Kalshi through intermediaries who have strong incentives to comply with Defendants’ threats even though they are unlawful. The threats are just as unlawful as Defendants’ threats to regulate Kalshi directly,” Kalshi argued to the court.
The suit did not name which companies were partnering with Kalshi, but the company did say there were existing term sheets jeoparized by Ohio’s threat to licensees. These term sheets include a clause that cancels them if regulations change and partners spoke to the firm expressing concern that their standing in Ohio would prevent them from moving forward as a partner.
In the suit, Kalshi posed similar arguments as it has in other jurisdictions that the Commodity Exchange Act (CEA) grants the Commodity Futures Trading Commission (CFTC) exclusive authority to oversee the types of financial contracts Kalshi offers customers.
The group is seeking an injunction not only to keep its sports contracts online as the case develops but also to enjoin the OCCC from enforcing any sort of license suspension to operators that work with Kalshi.
“Shutting down its [Kalshi’s] event contracts in Ohio would threaten Kalshi’s viability and require devising complex technological solutions whose feasibility is entirely untested and unclear,” said Kalshi attorneys in the suit. “Defendants’ acts also impair Kalshi’s existing contracts with consumers and business partners, subject Kalshi’s users to uncertainty and loss, undermine confidence in the integrity of Kalshi’s platform, threaten its prospective business relationships and jeopardize Kalshi’s status as a CFTC-approved exchange.”
Kalshi received C&D order in Ohio
In March, the OCCC sent cease and desist orders to Kalshi, Robinhood and Crypto.com, demanding the companies stop offering trading on sports-related event contracts. The OCCC compares sports event contracts to betting with Kalshi as an unlicensed operator.
Once cases started to develop in Nevada and New Jersey, the groups spoke and agreed to cease enforcement temporarily. However, in August, after a Maryland court ruled against Kalshi’s request for a preliminary injunction, the OCCC resumed communications and asked for Kalshi to answer a range of questions, including what kind of communication it has had with the CFTC on the topic.
Around the same time, the OCCC sent the letter to licensees cautioning them about partnering with groups offering sports-related event contracts.
In a Sept. 25 phone call, the OCCC told Kalshi it did not think it would extend the cease and desist enforcement any further, then followed up that statement with an updated cease and desist letter on Oct. 6, prompting Kalshi to file suit.
Kalshi now battling in half a dozen states
Kalshi is also dealing with legal woes in Massachusetts. Last month, the state’s Attorney General Andrea Joy Campbell signed an amicus brief challenging the legality of Kalshi’s sports event contracts. The suit against Kalshi, filed in Suffolk Superior Court, alleges Kalshi offers illegal sports betting through its sports event contracts. In addition to challenging the legality of sports event contracts, Campbell’s office is also seeking an injunction to pull Kalshi’s sports events offline in the state while the case is proceeding. The groups are currently battling over whether the case belongs in federal or state court.
A group of California tribes also believes Kalshi and Robinhood offer illegal sports betting.
Kalshi’s status in Maryland is also in limbo. The prediction market withdrew its motion for an injunction in the state after agreeing with state officials to wait until a Fourth Circuit Court of Appeals decision is made after Kalshi appealed a ruling that denied them preliminary injunctive relief to offer sports event contracts in the state earlier this year.
