The Kalshi Files
Get caught up on Kalshi’s prediction market saga: CFTC cancels roundtable, lawsuits mount in MD, NJ, NV. Uncertainty spikes as states clash over sports betting rules.
Friday is usually reserved for my longform features (and yes, I published one earlier today that you should absolutely read), but the Kalshi prediction market saga is moving too quickly to wait until Monday. With the CFTC’s roundtable canceled and lawsuits piling up, here’s what you need to know now.
Also, quite frankly, I’m tired of bogging down my daily newsletters with wall-to-wall Kalshi coverage.
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The Cancelled Roundtable = More Uncertainty
Some pretty big, but not entirely unexpected, news dropped last night, as the CFTC Roundtable scheduled for April 30 was cancelled.
The roundtable would have brought together disparate stakeholders and experts to debate whether prediction markets, such as Kalshi’s sports contracts, are legal ‘event contracts’ under CFTC oversight or merely disguised sports bets requiring state regulation.
I was hoping the Commodity Futures Trading Commission (CFTC) roundtable discussion scheduled for next week would calm the waters for several weeks, as we would finally have some insight into where the CFTC stands on the matter and where the future battle lines are drawn.
That hope evaporated faster than my March Madness bracket when the CFTC cancelled the roundtable, further stirring the already murky waters. Dustin Gouker offered some guesses at why the roundtable was cancelled here. My own belief is that the CFTC is discovering this is a much thornier issue than it at first believed.
Quite frankly, the CFTC is stuck between a rock and a hard place.
“I wouldn’t blame Acting Chair Pham for waiting to see how the court fights turn out. Andrew Kim, who has been crushing the legal analysis on this topic, said on LinkedIn. “Postponed roundtable notwithstanding, CFTC regulation of prediction markets seems to be inching closer to reality; the only question is, how broadly will the CFTC regulate, and will it entangle itself in the fight over sports contracts? If so, when?”
From my perspective, the cancellation is likely to increase uncertainty around Kalshi’s sports markets unless and until the CFTC issues guidance, as the court cases will take some time to resolve. With the CFTC remaining silent, we will be in a holding pattern, as more states are likely to issue C&Ds, and Kalshi will continue to file lawsuits while expanding its sports markets.
Kalshi has argued that since the CFTC hasn’t asked them to stop offering the markets, they are, by default, authorized to offer sports markets. Kalshi’s overarching argument is that the CFTC is the only regulatory body the company needs to answer to.
State-by-State Kalshi News
There are also updates from three states that've sent Kalshi cease-and-desist letters, prompting Kalshi to respond with lawsuits. There’s a lot to unpack, so buckle up — and realize this news will likely be out of date in the very near future.
Below, I’ll summarize the current situation and provide some commentary from Andrew Kim’s LinkedIn post, already referenced above. For anyone looking for a deeper dive, I’ve linked to Dustin Gouker’s excellent prediction-market-focused Event Horizon Substack.
Before diving into the state lawsuits, I also highly recommend my recent podcast with Gouker, as well as with Andrew Kim, whose legal analysis has been second to none.
Kalshi Files Suit Against Maryland
On April 21, Kalshi filed suit against the Maryland Lottery, arguing that the state’s cease-and-desist order on its sports-event contracts is unconstitutional. Kalshi claims the CFTC’s federal authority preempts state regulation, and Maryland’s actions threaten “irreparable harm” to its business. A status conference was held on Wednesday to discuss Kalshi’s motion for a temporary restraining order and preliminary injunction, which resulted in the following briefing schedule:
May 9 - Maryland Response
May 19 - Kalshi Reply
And as Daniel Wallach reported, “District Judge Adam Abelson has scheduled a hearing on Kalshi’s motion for preliminary injunction against the State of Maryland for Thursday, May 29th, at 10:00 AM.”
Andrew Kim from LinkedIn:
“Kalshi rode its Nevada victory into Baltimore federal court, taking on the Maryland gaming commission in its latest preemption challenge. We’ll see how Maryland refines the arguments that’ve already been made, and how Kalshi might respond in kind.”
More from The Event Horizon newsletter:
Kalshi Responds to New Jersey
Facing a cease-and-desist order, Kalshi filed a lawsuit in March and sought a preliminary injunction. New Jersey filed its brief on April 18, accusing Kalshi of bypassing state gambling laws by offering sports wagers disguised as “event contracts.” Kalshi’s reply brief, filed April 24, doubled down, asserting that the Commodity Exchange Act (CEA) preempts state regulation of its CFTC-designated market. A hearing is slated for April 30.
Kim went on to say, “When you bury your response to NJ's main 'exclusive jurisdiction' argument -- that CFTC authority is exclusive *as to other federal agencies, not the states* -- on page 8 of your 15-page brief, that doesn't inspire confidence in your counterargument.”
Andrew Kim from LinkedIn:
“This is the most interesting front to watch. New Jersey calls into question whether Kalshi’s sports contracts are swaps at all—where are the economic consequences, it asks? New Jersey also throws shade at Kalshi’s argument that the CFTC has “exclusive jurisdiction”—it may exclude the SEC and other federal agencies, NJ says, but not the States. You’ve also got the state Casino Association joining the fray, beefing up some of the Garden State’s arguments.
“Kalshi’s in for a fight here, and I think it’s well possible that things turn out differently than in Nevada. That may not be the worst outcome for Kalshi; not getting a preliminary injunction means it gets an appeal to the Third Circuit, possibly the first appellate waystation onto SCOTUS. Kalshi has asked for answers by April 30.”
More from The Event Horizon newsletter:
Nevada Files a Motion to Dismiss
After Kalshi won a preliminary injunction in early April, allowing it to continue offering sports contracts in Nevada, the state responded on April 24 with a motion to dismiss Kalshi’s complaint. Nevada argues that federal laws, such as the Wire Act, IGRA, and PASPA, demonstrate that Congress didn’t intend for the Commodity Exchange Act to supersede state gaming regulations, thereby challenging Kalshi’s claim of federal preemption.
Andrew Kim from LinkedIn:
“Nevada’s motion to dismiss raises a number of arguments about Kalshi’s compliance with technical requirements, and whether the gaming-official defendants are immune from suit. On the preemption merits, I see concepts of a plan, but not the plan itself. The preemption arguments aren’t grounded in first principles, so they’re hard to follow. I also see a lot of the “of course, we’re right!” hubris that resulted in Nevada losing in Round 1 (the preliminary injunction).”
Of note, the Nevada response cites Dustin Gouker’s Event Horizon newsletter entry: Ten Times Kalshi Said People Could Bet On Things.