Do You Want To Go To War Balakay
Kalshi is embroiled in numerous lawsuits, but there is a case to be made that Utah will be its toughest opponent.
The Bulletin Board
THE LEDE: Why Kalshi’s lawsuit against Utah is different from its other cases.
NEWS: Sweepstakes make the case for regulation in Virginia and Pennsylvania.
VIEWS: What does the SCOTUS decision on tariffs mean for prediction markets?
AROUND the WATERCOOLER: It’s all sports betting.
STRAY THOUGHTS: Hearts and minds.
Sponsor’s Message: Increase Operator Margins with EDGE Boost Today!
EDGE Boost is the first dedicated bank account for bettors.
Increase Cash Access: On/Offline with $250k/day debit limits
No Integration or Costs: Compatible today with all operators via VISA debit rails
Incremental Non-Gaming Revenue: Up to 1% operator rebate on transactions
Lower Costs: Increase debit throughput to reduce costs against ACH/Wallets
Eliminate Chargebacks and Disputes
Eliminate Debit Declines
Built-in Responsible Gaming tools
To learn more, contact Matthew Cullen, Chief Strategy Officer, Matthew@edgemarkets.io
The Lede: Will Utah Be Kalshi’s Most Difficult Opponent?
The prediction market fight has spilled over into one of the most unlikely corners: Utah. And Utah politicians have been doing their best Mr. Garvey impressions:
In an opinion piece in the Deseret News, Utah Attorney General Derek Brown wrote:
“So, let’s be clear about the distinction we’re being asked to accept. It was illegal in Utah to bet — in any manner — on whether the Seahawks will win the Super Bowl. But some apps claimed it was perfectly legal to “trade” on a financial contract tied to a future outcome in which the Seahawks would win the Super Bowl… Betting. Wagering. Trading on futures. A wolf in sheep’s clothing is still a wolf. As Utah’s attorney general, I view this as a distinction without a difference.”
These comments have led to Kalshi preemptively suing the state (no cease-and-desist letter has been sent), as Kalshi, “believes the Governor of Utah (the “Governor”) and the Attorney General’s Office of Utah (the “Utah AG”) will imminently bring an enforcement action against Kalshi with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange… And when Kalshi’s counsel made multiple attempts to contact the Utah AG to inquire as to whether Utah was preparing to take action against Kalshi, it was met with silence, even though the Utah AG had previously been willing to communicate with counsel.”
Utah is a unique battleground for two reasons.
This is the first time Kalshi has filed a preemptive lawsuit against any state (Coinbase has deployed this tactic, preemptively suing Connecticut, Illinois, and Michigan). Kalshi acted solely on tweets from Governor Spencer Cox and Senator John Curtis, and Attorney General Derek Brown’s op-ed, and radio silence from the AG’s office — no formal warning was issued by the state. In every prior case, the company only went to federal court after receiving a cease-and-desist letter. Recall that Massachusetts got the jump on Kalshi by not issuing a cease-and-desist letter, choosing to sue Kalshi in state court.
Utah also marks the first time Kalshi has been drawn into litigation with a non-gaming state; its other lawsuits are with states that have legalized, regulated sports betting. Utah’s arguments are the same, but they may land better as the overarching question is more binary: Are prediction markets skirting a state’s sports betting licensing requirements, or are they violating the state’s constitutional ban on gambling? It may be a distinction without a difference, but the argument is cleaner and cannot be framed as the gambling industry and gambling states “protecting a monopoly.”
Essentially, Utah is one of two states that can’t be called a hypocrite that is trying to protect its state-sponsored gambling industry.
News: Sweepstakes Take Their Case to VA and PA
With sweepstakes prohibitions continuing across the country, the Social Gaming Leadership Alliance (SGLA) has shifted from fighting prohibitions (its 2025 strategy) to advocating for regulation.
The new, “regulate us,” strategy struck out in Indiana, which looks poised to prohibit the activity, and the SGLA is now making its case in Pennsylvania and Virginia. Both states are interesting targets, as Pennsylvania has legal online sports betting and online casinos, while Virginia’s House and Senate have passed online casino bills this year, while also considering a sweepstakes prohibition.
“The Virginia legislature faces an important choice,” said Sean Ostrow, Managing Director of the Social Gaming Leadership Alliance said in a recent press release. “Lawmakers can effectively ban an established Social Plus industry that has operated in Virginia since 2012, or they can implement a thoughtful regulatory framework that protects consumers and generates more than $30 million in new annual revenue for the Commonwealth.”
This strategic shift may be a day late and a dollar short, as, forgive the mixed metaphors, the sweepstakes cake appears baked. Using VGW as the benchmark, here are the 14 states that sweepstakes operators don’t operate in: California, Connecticut, Delaware, Idaho, Louisiana, Michigan, Mississippi, Montana, Nevada, New Jersey, New York, Tennessee, Washington, and West Virginia
As I identified in my Sweepstakes Tracker available to Forecast Tier subscribers, “This pivot comes at a critical juncture for an industry facing mounting regulatory headwinds.”
That said, if you’re the sweepstakes industry, there are two reasons for optimism:
Prediction markets have become the primary target, allowing the sweepstakes industry a chance to regroup without being assailed on a daily basis.
A glut of gambling bills, from legalization efforts to tax hikes, credit card bans, and other policy changes could offer an entry point for sweepstakes regulation.
Here is the SGLA’s Pennsylvania press release:
Economic modeling shows that implementing a modern regulatory framework for online social games with sweepstakes promotions, or Social Plus games, could generate more than $40 million in new annual revenue for Pennsylvania.
Additionally, Social Plus operators spend $1.8 billion nationwide on key services including marketing, technology, and payment processing, directly benefitting Pennsylvania companies like PNC Financial Services and SteadyPicks Gaming.
And the Virginia press release:
Economic modeling shows that implementing a modern regulatory framework for online social games with sweepstakes promotions, or Social Plus games, could generate more than $30 million in new annual revenue for Virginia.
Additionally, Social Plus operators spend $1.8 billion nationwide on key services including marketing, technology, and payment processing, directly benefitting Virginia companies like Capital One and Oddsjam.
Both releases link to Eilers & Krejcik Gaming (a newsletter sponsor) reports prepared for the SGLA in February 2026.
SPONSOR’S MESSAGE - Underdog: the most innovative company in sports gaming.
At Underdog we use our own tech stack to create the industry’s most popular games, designing products specifically for the American sports fan.
Join us as we build the future of sports gaming.
Visit: https://underdogfantasy.com/careers
Views: SCOTUS Tariff Decision Might Portend a PM Ruling
The Supreme Court’s recent ruling striking down President Donald Trump’s global tariffs under the International Emergency Economic Powers Act (IEEPA) offers a potential preview of how the court might rule in a prediction markets case.
Chief Justice John Roberts’ majority opinion leaned heavily on the major questions doctrine, the same doctrine the Court has used in recent years to rule against issues like student-loan forgiveness and climate regulation.
As attorney Daniel Wallach noted on X, “SCOTUS's decision in the Trump tariffs case is a boon for the states' argument vs. sports prediction markets, reinforcing that there must be ‘clear congressional authorization” for agency actions of "major economic and political significance.’”
In other words, SCOTUS has consistently said, Congress must speak clearly. Ambiguity or stretchy readings of old statutes isn’t going to cut it.
As Joe Brennan Jr. highlighted in his own X post (quoting Justice Gorsuch’s concurrence), there is a lesson here for prediction markets, because the current fight between prediction markets and states hinges on the very same question:
That question is: Does the Commodity Exchange Act (as amended in 2010 by Dodd-Frank) give the CFTC clear authority to treat peer-to-peer bets on NFL games, March Madness brackets, or player props as regulated “swaps” or “event contracts,” thereby preempting state gambling laws?
And if the SCOTUS (or at least Gorsuch) is willing to say the President doesn’t have that authority (one man), what will its opinion be of the CFTC, which is currently a one-man band, making this type of determination?
That brings us to the 2024 Loper Bright decision. Post-Loper, courts no longer give agencies the benefit of the doubt on ambiguous statutes. They decide the best reading themselves. So any federal judge (or, ultimately, SCOTUS) confronting the CEA’s definition of “commodity,” “swap,” or “event contract” will do so with fresh eyes—not with a thumb on the scale for the CFTC’s interpretation.
These cases are not perfect analogs, but the tariffs ruling is the latest in a clear pattern: Major Questions Doctrine + Loper Bright = a highly skeptical Supreme Court when agencies try to expand their turf without explicit congressional blessing. As Gorsuch put it, these rulings shouldn’t be taking place in a vacuum, they should be consistent.
Around the Watercooler
Social media conversations, rumors, and gossip.
I know this has little to do with the legal questions, but the idea that sports contracts on prediction markets are somehow different from sports bets at sportsbooks is raising a lot of eyebrows.
As the Boston Globe Editorial Board recently wrote:
“Federal regulators, however, don’t want you to think of prediction markets as gambling, and so they’re coming up with convoluted arguments for what does or doesn’t qualify as gambling. Take, for example, the simple premise of betting on sports. If you recently made — and subsequently lost — a bet on a sports betting platform like DraftKings that the Patriots were going to win the Super Bowl, your bet would have been legally considered a form of gambling. In Massachusetts, platforms like DraftKings are regulated and monitored by the Massachusetts Gaming Commission.
“But if you made that same bet on prediction market platforms like Kalshi and Polymarket, then federal regulators wouldn’t have considered you a gambler; instead, they would view you as a financial investor purchasing an events contract or a swap.”
And as I said on X, cleverly reframing the agreed upon definition of gambling (legally and culturally) is nothing more than cloaking a self-interested argument with philosophical gloss.
As I said in a previous newsletter entry about this argument: “The definist fallacy utilizes an atypical definition of key terms to make one’s position easier to defend, often presenting it as the obvious true meaning… because it suits their argument.”
Here’s how I framed the difference in the previous entry:
“All gambling is risk; not all risk is gambling. What makes a risk gambling is the context it occurs in.
“Risk is the broader category: it’s exposure to uncertainty or potential loss in any context. Gambling is when you voluntarily take on risk, typically for entertainment or profit, with clear stakes and probabilistic outcomes. In other words, risk often stems from necessity or external forces (the price of corn futures), but within the gambling subset, risk is a choice. It’s opt-in entertainment with engineered odds.
“Risk can also be unavoidable or lack financial gain. Gambling is purposeful and has a financial reward/penalty, and here’s the key: a gamble has a winner and a loser. Risk isn’t always zero-sum.
“For instance, crossing a busy road is an unavoidable risk if you need to get somewhere; it doesn’t involve gain beyond survival or convenience — Although, prediction markets would like to change that by letting you trade (gamble) on these outcomes, basically amplifying risk by adding gambling to it.
“Prediction markets offer zero-sum bets on outcomes, with clear winners and losers.
“Yes, there are financial instruments with gambling-like elements, but core investing is different.
“And yes, I agree that there are similarities between some financial instruments and prediction markets (short sellers win when others lose), but I would stop way short of lumping the stock market and insurance in with sportsbooks.
“Markets aren’t zero-sum. If the economy grows, most investors can win. Conversely, if someone buys stock in a company and it somehow goes to zero, there isn’t a winner. It’s the difference between value destruction (the stock market) and value transfer (sportsbooks and prediction markets).”
Stray Thoughts
Regular readers know I’m a zeitgeist guy, and focus a lot on who is winning the narrative battle. There are several interesting polls that highlight where the public is on several key issues. I plan on getting to these polls in tomorrow’s newsletter, or early next week if the news cycle goes crazy.