Over the past several months, prediction markets platform Kalshi has been under increasing pressure, but never on the back foot.
Although it has been attacked in multiple states, the prediction markets app and firm has also taken an offensive stance, defeating the Nevada Gaming Control Board in court and securing a temporary injunction on a previously issued cease-and-desist order against Kalshi to discontinue its sports future-event contracts.
Kalshi challenges another gambling regulator in the courts, in Maryland
History may repeat itself as the platform is now going after the Maryland Lottery and Gaming Commission, which also served Kalshi with a cease-and-desist letter and directly accused the platform of offering products that are "indistinguishable from the act of placing a sports wager."
This stipulation has been hotly disputed by Kalshi, which has called its prediction markets something that can be regulated by the Commodity Futures Trading Commission, and not within the remit of gambling regulators at all. Kalshi is similarly pushing back against the New Jersey Division of Gaming Enforcement, but a decision is yet to come.
Kalshi is maintaining that the CFTC and the CFTC alone may step in and tell it what prediction markets are prohibited, and further notes that because it doesn’t set the odds itself, it hardly classifies as a gambling company such as DraftKings or FanDuel.
However, Kalshi is facing a long list of antagonists in the face of state authorities, with regulators in Illinois, Michigan, Montana, Ohio, Connecticut, Kansas ,and Washington all going after Kalshi and issuing a cease-and-desist letter against the platform, and a few others.
The qualified victory in Nevada is not a blueprint for how the rest of these challenges would turn out, as skepticism is mounting over how the Wire Act may be interpreted to the detriment of Kalshi.
One possible challenge is that the Wire Act de facto prohibits the interstate transmission of data, which could hurt Kalshi’s current model, as the platform collects the handle in aggregate, rather than running individual state-facing sub-entities like traditional oddsmakers do.
The Wire Act and the ongoing assault against Kalshi
But does the Wire Act really apply to Kalshi? This is the fresh avenue that regulators would have to test. Although things have been quiet in Nevada, a temporary injunction is not the same as Kalshi swatting all detractors, with regulators possibly seeking to prove that Kalshi cannot operate in the state.
DraftKings, a traditional sports betting platform in the meantime, toyed with the idea of launching a prediction platform of its own, but it is possibly reconsidering this now.
In the meantime, Kalshi has proven its platform holds a strong appeal with younger audiences of sports bettors who are happy to switch to "prediction markets" if they find the product more entertaining.
