Kalshi’s decision to venture into prediction markets that cover sports events, and specifically March Madness, have earned it praise from consumers and an unprecedented scrutiny from gambling regulators all over the country, with the Nevada Gaming Control Commission, the Division of Gaming Enforcement and the Ohio Casino Control Commission now joined by the Connecticut Department of Consumer Protection and the Illinois Gaming Board now moving in against the company as well.
Kalshi takes more legal heat all over the United States
Kalshi has filed lawsuits against the Nevada Gaming Control Commission and the Division of Gaming Enforcement already, but pressure has been mounting quickly, with more regulators questioning the platform over its right to offer sports prediction markets, something that Kalshi insists is allowed to do under federal law, and that it lies outside the remit of state gambling regulators.
Connecticut’s announcement of the probe is not exactly part of the broader scope of legal action taken against the platform, nor does it appear to be part of a coordinated attack. Rather, Connecticut’s regulator said that it has been investigating the platform for several months now, and it was only now prepared to announce the move.
However, Connecticut failed to muster any specifics as to what it was accusing the companyof, other than the fact that it had violated Connecticut law. Illinois, on the other hand, has been less coy about its intentions towards the sector, and Kalshi specifically.
The Illinois Gaming Board has sent cease-and-desist letters to Kalshi, but also Robinhood and Crypto.com, which are also offering prediction markets on sports. The regulator accuses the three companies of violations under the state’s Criminal Code and Sports Wagering Act.
A legal showdown that comes down to one thing – interpretation
In other words, the regulator is equating the prediction markets with a form of unlicensed gambling that is conducted without the say-so of the gambling regulator, which will be the main point of contention in the coming months for Kalshi when it argues its case in state and possibly federal courts.
There is no real clarity as to what happens next – Kalshi has already sued with the Commodity Futures Trading Commission and earned a qualified victory allowing it to offer political prediction markets, but whether it repeats this feat against state gambling regulators is another thing altogether.
One thing is sure: how prediction markets are interpreted will decide the fate of such platforms in the future. For its part, Kalshi has warned against overregulation of what could be one of the "critical innovations" of the century.
