A Change Of Heart
After siding with Kalshi earlier this year, A Nevada judge has become a prediction market skeptic, and is leaning toward rescinding Kalshi's preliminary injunction.
The Bulletin Board
THE LEDE: NV Judge turns on Kalshi.
ROUNDUP: NCPG names new executive director; UFC + Polymarket; FL DFS bill; Ontario liquidity sharing; MA vs. Kalshi hearing rescheduled.
NEWS: Online gambling hearing in MA covers a lot of ground.
VIEWS: MA regulators draw a line around prediction markets.
AROUND the WATERCOOLER: Calls for prop bet restrictions and PrizePicks double-dips the chip.
STRAY THOUGHTS: $600 isn’t a bet.
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The Lede: Nevada Judge Changes Tune on Kalshi
Things are starting to get interesting in Nevada, and at the center of it is Nevada District Judge Andrew Gordon.
Judge Gordon previously granted Kalshi a preliminary injunction against the Nevada Gaming Commission, allowing the platform to offer event contracts in the state. The ruling found that the contracts qualified as derivatives under federal commodity laws, thereby preempting state gambling regulations.
However, in a separate but similar case involving Crypto.com, Judge Gordon denied their motion for a preliminary injunction months later, ruling that Crypto.com’s sports-event contracts did not meet the definition of swaps under the Commodity Exchange Act (CEA), thus subjecting them to Nevada’s gambling laws and leading Crypto.com to halt such offerings in the state.
Fast-forward to this past Friday, and the parties reconvened in Gordon’s courtroom for a 2.5-hour showdown after Nevada regulators sought to dissolve Kalshi’s injunction, citing Gordon’s Crypto.com ruling as grounds for reconsideration.
You knew it was going to be interesting when Judge Gordon noted that he came prepared with a whopping 19 pages of questions, focusing most of his attention on the nuances of federal preemption, swap definitions, and the real-world harms at play.
Without going too deep into the weeds, Kalshi’s counsel, Will Havemann, and Robinhood’s lawyer, Kevin Orsini, continued to argue that states can’t enforce their laws against federally regulated products and that geofencing the state would impose irreparable costs and risks on Kalshi.
Nevada’s attorney, Nicole Saharsky, insisted that sports contracts don’t qualify as swaps because the wager itself creates the risk, not the underlying event. She highlighted economic fallout, including lost state revenue from operators like DraftKings withdrawing their license applications to offer prediction markets, and urged Kalshi to simply apply for a gaming license.
It became evident that the Gordon who would decide this case is the Gordon who issued the Crypto.com ruling. Throughout the hearing, Gordon expressed growing doubt about Kalshi’s broad definition of swaps and the idea of irreparable harm from geofencing.
“I will tell you, in all candor, I’m leaning toward dissolving the injunction,” Gordon said. “It seems like your definition is so broad that pretty much anything can become a swap. Anything can have a financial consequence.”
Still, there was no ruling last week. Gordon took the matter under advisement, promising a decision soon — potentially around Thanksgiving — and encouraged settlement talks to avoid further escalation.
Of course, Kalshi is likely to appeal (to the Ninth Circuit), and we seem to be on a road to the Supreme Court.
STTP Thoughts: If Gordon dissolves the injunction, it could force Kalshi and others to geoblock Nevada users, as Crypto.com did. In doing so, Kalshi would undercut its own geolocation arguments, namely that it is too expensive and conflicts with CFTC impartial-access rules requiring nationwide uniformity, which are also being undermined by DraftKings and FanDuel, who claim they will geofence legal sports betting states.
As an aside, I recently told someone privately that FanDuel and DraftKings, assuming they have not burned bridges and overstepped the bounds of state regulators, are in a win-win situation, as their entry into prediction markets is undercutting Kalshi’s legal arguments.
As always… Stay tuned.
Roundup: NCPG Executive Director; UFC + Polymarket; FL DFS Bill; Ontario Liquidity Sharing; MA vs. Kalshi Hearing
NCPG names new executive director [Press Release]: The National Council on Problem Gambling has appointed Heather L. Maurer as its executive director. Per the press release, “Maurer brings more than 25 years of leadership experience in the fields of public health, policy, and nonprofit management. Most recently, she served as Chief Executive Officer of the National Association of Nurse Practitioners in Women’s Health.” Maurer will step into the sizable shoes of Keith Whyte, who (abruptly?) left the NCPG in January. The organization is also at a crossroads, highlighted by the recent 1-800-GAMBLER fiasco and its fallout, and I am told to expect more details soon.
UFC parent company partners with Polymarket [Press Release]: TKO Group Holdings and Polymarket have entered into a “comprehensive multi-year partnership in which Polymarket will become the Official and Exclusive Prediction Market Partner of UFC and Zuffa Boxing.” Here’s the interesting bit: “Polymarket will power the first-ever real-time Fan Prediction Scoreboard within UFC broadcasts… that visualizes how fans around the world are forecasting each fight as it unfolds.” STTP Thoughts: This is actually a very good use case for prediction markets, and something Karate Combat does with its $KARATE Tokens that can be used to wager on fights. Also of note, UFC fights will begin airing on Paramount+ in January, marking the end of the PPV era.
A new Florida bill seeks to legalize DFS [SBC Americas]: A Florida bill aims to crack down on illegal gambling and would also legalize DFS contests: “One of the proposals in Rep. Dana Trabulsy’s HB 189, which primarily seeks to impose stronger penalties for illegal gambling in the state, would authorize DFS contests under broad definitions,” that may or may not include against-the-house versions of DFS.
Ontario court paves way for poker and DFS liquidity sharing [Covers]: “Ontario DFS and poker fanatics may have cause to celebrate, as the highest court in the province has sided with a proposed plan that could help revive pay-to-play daily fantasy contests and expand poker games.” The decision will likely be appealed, but even so, it will take time for Ontario to enter into national and international agreements to share liquidity.
Massachusetts vs. Kalshi hearing rescheduled [Daniel Wallach, X]: From Daniel Wallach: “The hearing on MA’s emergency motion for preliminary injunction against Kalshi has been rescheduled for Tues, Dec. 9th, at 10 am. Good timing for MA, as it allows for consideration of Judge Gordon’s anticipated ruling in Kalshi v. NV (expected in the next 2 weeks).” In related news, Robinhood’s case against Massachusetts has been dismissed without prejudice.
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News: An Eventful Online Gambling Hearing in MA
With everything else going on, you may have missed one of the more interesting online gambling hearings in recent memory, when the Massachusetts Joint Committee on Economic Development and Emerging Technologies hosted a hearing last week.
There was the usual back-and-forth between opponents and advocates, but also a Massachusetts high schooler’s gambling project, and a Massachusetts lawmaker sharing his own problem gambling story.
Perhaps the most headline-grabbing part of the hearing was when Massachusetts State Sen. John Keenan apologized for his sports betting vote in 2022.
“When I voted to legalize sports betting I never thought it would become what it is. We unleashed an industry that now promotes betting on anything and everything imaginable and unimaginable all over the world, 24 hours a day, every single day.
“I deeply regret my vote. And I want to publicly apologize to those who have lost the opportunity to sit and watch a game just for the enjoyment of the game. I want to apologize to those who find themselves in the dark spaces of betting addiction and to those working through recovery, and to their families and friends. I want to apologize to those who have lost loved ones to suicide because of gambling issues.
“This bill is an opportunity to put guardrails in place to fix what is wrong with sports betting.”
Now Keenan wants to add more guardrails through his bill, S 302, which seeks to amend the state’s current sports betting law to prohibit:
Prop and in-play bets
Advertising during a televised sporting event
Compensation for any percentage of wagers or deposits placed by a customer of the operator or sports wagering operator.
The legislation also:
Sets deposit limits of $1,000 daily and $10,000 monthly, unless the bettor undergoes an affordability check that requires “daily or monthly amounts wagered do not exceed 15 percent of the amount said person has available in a bank account.”
Increases the tax rate from 20% to 51%.
Requires operators to “supply the commission with customer tracking data collected for each player’s online gambling,” for anonymized research. “The customer tracking data shall report on… player behavior, including, but not limited to, frequency of play, length of play, speed of play, local time of play, amounts wagered and, for each wager, whether the wager was (i) made during the sports contest or before the contest began, or (ii) a parlay wager.”
Adds the following to Section 2 of Chapter 93A (unfair practices law): “d) The provisions of subsection (a) shall apply to advertising and promotion of wagers authorized under chapter 23N related to any (1) bonus promotions, (2) same-game parlays, (3) odds boosts, (4) reload bonus or (5) risk-free, no-sweat or other free wagers commonly understood to have a similar meaning and utilized to attract a person to patronize a qualified gaming entity.”
Meanwhile, State Rep. David Muradian (Podcast guest #69), John Pappas (Podcast guest #36), and Rebecca London from DraftKings, noted that HB 4431 would bring gaming out of the shadows and under the oversight of the Massachusetts Gaming Commission, so Massachusetts, and not foreign websites, reaps the benefits of the existing demand for online gambling.
Muradian termed it “not an expansion of gambling for its own sake, but rather an expansion of accountability; taking activity that is already happening and making it safe, transparent, and beneficial to the state and its residents.”
There was also a testy exchange involving iDEA Growth’s John Pappas. After Rep. Adam Scanlon equated the argument for legalizing online casinos on the basis of people already doing it to legalizing heroin, he told Rep. Muradian, “Don’t take my comments as a criticism of you… I’m skeptical of the industry, though.”
As I’ve said in the past, right message, wrong messenger.
STTP Thoughts: Don’t expect much on either front (new restrictions or expansion) from Massachusetts this year.
Views: MGC Warns Operators About Prediction Markets
Massachusetts is the sixth state (Arizona, Illinois, Michigan, Nevada, and Ohio are the others) to warn its licensed sportsbooks not to offer sports contracts via prediction markets, with regulators drawing a clear line in the sand regarding the offering or promotion of such contracts in Massachusetts.
“The Massachusetts Gaming Commission is aware that several Massachusetts sports wagering licensees are considering or have begun the process of partnering with entities in the prediction market space to begin offering event wagering contracts,” the letter signed by MGC executive director Dean Serpa begins, before getting into the warnings.
“Please accept this letter as notice that you are prohibited from offering sports-related event contracts in Massachusetts, directly or via an affiliate, related business entity, or other association, or directing patrons to such event contracts being offered in Massachusetts.”
“In the event you offer sports-related event contracts in Massachusetts or direct patrons to such event contracts being offered in Massachusetts, the Commission may take steps up to and including revocation of your license. In addition, to the extent any other regulator takes action against your license due to your operation in the prediction market space, such action may inform decisions related to your suitability in Massachusetts.”
The looming question is this: Since FanDuel and DraftKings are selectively launching prediction markets in states without legal sports betting, will any state try to pull a license for offering sports contracts?
However, terminating a license is one of the many routes state regulators (and lawmakers) could take.
As I noted last week, regulators could choose to make life miserable for licensees. Increasing fines for violations; requiring operators to appear in person more frequently; mandating more rigorous and frequent audits or compliance reviews; and requiring enhanced reporting on financials, user data (VIPs and limited bettors), and marketing practices.
These subtler tactics enable regulators to apply pressure without resorting to the nuclear option of complete revocation, which could invite legal challenges or disrupt the broader sports betting ecosystem.
The industry is using prediction markets as a threat to keep tax rates down and even to expand legal gambling options, but states could do something similar. Regulators might not need to pull licenses outright; the threat alone, combined with these harassment-style measures, could force operators to choose between prediction markets and their core sportsbook businesses. It feels akin to a game of regulatory chicken, but Nevada’s aggressive stance suggests the warnings, at least in some states, are more than just bluster.
Around the Watercooler
Social media conversations, rumors, and gossip.
Calls for prop betting restrictions continue to grow, and they are coming from some unlikely corners.
First, there is super-agent Scott Boras, who said the following at the annual general managers meeting: “You have to remove those prop bets to make sure that the integrity of the players is not questioned, because there are going to be all forms of performance questions given now to pitchers and such when they throw certain pitches to the back of the screen, or situationally, and really, we don’t want any part of it. We want the players’ integrity never to be questioned.”
And there were also some interesting comments from Rick Pitino, who coached Terry Rozier at Louisville: “I don’t like these prop bets where players get so many rebounds, so many assists, so many steals. I don’t think that’s good for the game. But you know, everybody says it’s bad. ESPN will be on TV, and they’re arguing over these things happening. But let’s break away now for FanDuel, let’s break away for MGM. So it’s not the best marketing tool for stopping it.”
Also, we have PrizePicks double-dipping with Polymarket and Kalshi:
Dustin Gouker tried to make sense of this in his Event Horizon newsletter:
“PrizePicks is now live with prediction markets. But not with Polymarket!
“The fantasy sports pick’em app launched its prediction markets product on Friday in 38 states, with Kalshi’s markets powering the offering. Sports event contracts appear to be available in 15 states.
“The news comes after PrizePicks announced earlier this week that it would be partnering with Polymarket. That deal is still in place. A PrizePicks spokesperson tells The Event Horizon that it will work with multiple designated contract markets (DCMs) — i.e. Kalshi, Polymarket and maybe others! — moving forward to provide the “best possible experience” to users.”
Stray Thoughts
Before the UFC, there were the Gracie Challenges. One of the people who accepted the challenge was Jason Delucia, who grew up a town over from me and went on to fight in Pancrase and the UFC.
I recall Delucia talking about the match and how he was struggling to get by and wanted to make it a “money” fight. The Gracies asked how much, and Delucia said $600. The fight was pushed off a couple of times, and Delucia thought the Gracies were ducking him. Eventually, he received the call, but Rorion Gracie said no money. Delucia accepted and was easily beaten.
When he asked why they didn’t take the bet, Rorion (astutely) told him, ‘$500 is a bet. $1,000 is a bet. $600 is rent.’
I believe there is a great deal that the gambling industry, the responsible/problem gambling community, and regulators and lawmakers can learn from this story.