The Bulletin Board
THE LEDE: Massachusetts court seems unimpressed by Kalshi’s arguments.
ROUNDUP: A look at the stories you may have missed.
NEWS: EKG Prediction Market Monitor Takeaway #1: The Opportunity.
AROUND the WATERCOOLER: Legitimate use cases for sports contracts.
STRAY THOUGHTS: What we can learn from Roman gambling laws.
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The Lede: MA Court Isn’t Buying What Kalshi Is Selling
It’s been a rollercoaster ride for Kalshi in court (with wins in New Jersey and Arizona and losses in Ohio and Nevada), and its latest appearance in Massachusetts was the equivalent of the ride getting stuck while you’re upside down.
Kalshi was able to plead its case to the highest court in Massachusetts, the Massachusetts Supreme Judicial Court, but the panel of seven judges seemed very skeptical of Kalshi’s claims, which were delivered by Grant Mainland of Milbank.
Here are a couple of instances where judges expressed their skepticism [reporting from InGame].
Justice Scott L. Kafker:
“The major policies doctrine from the Supreme Court said Congress would be explicit in making major policy changes. And second, sports gambling is huge. So why isn’t this the elephant being put in the mousehole? It just seems like if Congress was going to do this, it would do this more clearly and more distinctly. I just feel like you’re swimming upstream here.”
Justice Dalila Argaez Wendlandt:
“Usually, Congress would have used different words than ‘exclusive jurisdiction.’ That to me sounds like, ‘As to the CFTC and the SEC, this part is with the CFTC,.’ Do you have any examples in all of the [U.S. Code] where ‘exclusive jurisdiction’ was a method of preemption over state authority?”
But here’s where things really went sideways for Kalshi, with Justice Elizabeth N. Dewar holding their feet to the fire:
Here’s the full exchange (lightly edited):
Grant Mainland: “Congress contemplated that there would be event contracts that involve gaming, and let’s just stipulate that these contracts involved gaming.”
Justice Dewar: “Well actually, you certified to the CFTC that they do not involve gaming. Didn’t you have to certify, as part of your self-certification, that these did not violate 40.11?”
Mainland: “Our interpretation of 40.11, as we’ve explained to the CFTC, and the CFTC has put in briefs in a lot of these different matters, agreeing with it is that 40.11 has two components to it: Does it involve gaming? And is it contrary to the public interest? There has never been a public interest review with respect to sports-related event contracts. There has been with respect to election-related [contracts].”
Justice Dewar: So it’s incorrect that you had to self-certify whether the contracts involved gaming.
Mainland: I’m not remembering if we had to self-certify. We had to self-certify compliance with the CEA and CFTC regulations.
Justice Dewar: 40.11 says all contracts involving gaming are not allowed.
Mainland: 40.11(a) does say that.
Justice Dewar: Um, so I’m confused. Are these contracts involving gaming or not? Because you’ve certified that they’re not involved in gaming. But now you’re granting they are involved in gaming.
Mainland: I don’t think the self-certification got into the granularity of ‘doesn’t involve gaming and is it contrary to public interest.’ Rather, our view is consistent with 40.11 writ large, but 40.11(a) has to be read in conjunction with 40.11(c).
Justice Dewar: But that’s if the CFTC wants to exercise its discretion to kick something off as part of the public interest but the CFTC passed a regulation that still exists today that all contracts that fall under [40.11](a) are unlawful or should be prohibited.
Mainland: I understand the provision you’re referring to, but we believe it’s inartfully drafted and is being contemplated if it needs to be revised…
Essentially, Kalshi’s argument is that there is a two-prong test, and the rules (even though they are in separate sections) cannot be read singularly, which would give the CFTC the final call on whether a contract violates the prohibited contracts in 40.11.(a). Essentially, rather than a blanket prohibition on the contracts, there is a procedural mechanism in 40.11.(c) that must also be considered, and that determines the legality of the contract.
The counterargument is 40.11(a) is a categorical ban, while 40.11.(c) is a discretionary procedural safety valve for borderline cases.
Here are the two rules for anyone that wants to parse the language:
40.11(a), which deals with prohibitions, says: A registered entity shall not list for trading or accept for clearing … any of the following: (1) An agreement, contract, transaction, or swap … that involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law; or (2) [similar activities that the Commission later determines by rule are contrary to the public interest].”
40.11(c), which deals with the CFTC’s 90-day review process, says: “The Commission may determine … that a contract which may involve … an activity enumerated in § 40.11(a)(1) … be subject to a 90-day review.
During that review, the Commission can require the exchange to suspend listing/trading, and it must then issue a final approve-or-disapprove order.”
Roundup: So Much News; So Little Newsletter Space
Kalshi beefs up KYC to detect under-18s [Axios]: Kalshi has implemented several safeguards to keep under-18s off the platform: “Kalshi is putting in place new tools to prevent minors from trading on the prediction market, but is resisting calls to block ages 18-20… Requiring all users to use facial recognition technology when opening the app… Requesting selfies of certain users deemed to be at higher risk of problematic trading… Promoting two-factor authentication. Installing a new tool that allows users to see if someone else has logged in using their information.” As I’ve previously noted, Kalshi has instituted several policies to get ahead of criticisms.
New York bill would create a “prop bet task force” [SBC Americas]: New York State Sen. Jeremy Zellner has introduced legislation, SB 10153, that “would establish a “proposition betting task force” within the Rockefeller Institute of the state government to study proposition bets.” Per SBC Americas: “The bill’s summary specifies that the independent task force would place a particular focus on assessing ‘under’ prop wagers, wherein gamblers bet on an individual athlete falling below a certain statistical threshold for things such as points scored, strikeouts recorded, and many others.”
Hawaii working group meets to discuss gaming expansion [Legal Sports Report]: A working group created in 2025 to study potential gambling expansions heard from the industry in April (its fourth meeting) on potential legalization of casinos and sports betting — Hawaii is one of two states that has zero legal gambling options. The 24-member work group is required to submit its recommendations before the start of the 2027 legislative session. Previous STTP coverage of the work group.
41 state AGs sound off on prediction markets [Press Release]: “[New Jersey] Attorney General Jennifer Davenport today co-led a bipartisan coalition of 41 attorneys general in urging federal regulators to reaffirm that jurisdiction over sports gambling belongs to states… The 41 attorneys general filed a formal comment with the Commodity Futures Trading Commission, arguing that prediction markets – platforms where users trade contracts on the outcome of future events – have effectively become unregulated sportsbooks.” Attorney General Davenport said: “Prediction markets have no right to offer sports gambling in New Jersey in violation of the bedrock rules that other wagering operations follow. States have had longstanding authority to oversee all gaming within their borders, which is important to protect residents from gambling addiction and deter insider trading. We call on the CFTC to stop their federal power grab and recognize this authority belongs with the States.”
News: EKG Prediction Market Monitor Looks at Opportunities
Eilers & Krejcik Gaming recently released its inaugural Prediction Market Monitor (key findings and purchase options here), a 47-page breakdown of the prediction market landscape.
Every page was interesting, but there are three findings that jumped out at me, as all three are things Straight to the Point has touched on in the past:
The Opportunity
The Headwinds
The Competitive Landscape
Today I’ll look at the road to profitability, or as I’ve discussed in the past: proof of concept.
That is something STTP has been saying from the outset (two examples can be found here and here): It’s great that prediction markets are popular, but when you have a valuation higher than DraftKings, I’d really like to see the path to profitability.
“Running a gambling operation — whether a casino, a traditional sportsbook, or a prediction market — is far from a guaranteed profit machine… Established operators have shown that high customer acquisition costs, compliance burdens, and competition can quickly turn apparent opportunities into financial pitfalls.”
Or, as I said to Discerning Capital’s Davis Catlin on the podcast, “Just because you’re becoming bigger and bigger and getting more and more customers, that doesn’t necessarily mean your profits are going up, if you’re even profitable.”
Basically, as EKG notes, there is a lot of uncertainty:
“While leading sportsbooks are entering the PM fray, there is still a sense they are driven more by stock market pressure than by genuine strategic conviction. Part of the problem is uncertainty around the business model. As one OSB executive put it: ‘no one really knows how to make money from this yet.’ The economics are unclear and can only be understood through real activity — collecting customer data over months and years.”
That uncertainty is reflected in sign-up bonuses, per EKG, which notes that of the major prediction market operators, Fanatics $75 bonus was the highest, with Kalshi and Polymarket offering $10 and $20 respectively:
Around the Watercooler
Social media conversations, rumors, and gossip.
Susquehanna submitted some solid arguments for sports contracts having economic consequence:
There are actual hedging opportunities at prediction markets, but the ones above are examples of self-created risk. Most businesses manage normal everyday risks through traditional insurance. If you want to run gimmicky promotions, that’s on you. We don’t rewrite the laws or restructure industries because a business wants to run a wacky promotion.
Or consider former CFTC commissioner and Kalshi board member Brian Quintenz’s remarks at the 29th Annual Milken Institute Global Conference on Monday (reporting from SBC Americas):
“I think there’s a difference between speculation and gambling. Speculation in the financial markets is wagering or trading where there is more of an economic impact than just the money that is being traded, right? … Is anyone gonna sit here and tell me that there is no economic, financial, or commercial consequence to who wins or loses the Super Bowl?”
Yes, there’s an edge case use for tentpole events like the Super Bowl. The problem is, prediction markets sports contracts don’t stop at the Super Bowl, because I’d love to see him explain the economic, financial, or commercial consequence of this prediction market contract spotted by Dustin Gouker:
Stray Thoughts
Light & Wonder’s Howard Glaser putting it only the way he can:
Howard was a guest on the podcast back in June for a chat on unregulated gambling.
Episode 54: 50 Shades of Gray Gaming with Howard Glaser
“Sweepstakes are an egregious example of unregulated gaming eroding the integrity of the regulated market, with no consumer protections.” ~ Howard Glaser