Kalshi CEO explains suing New Jersey, Nevada regulators
Company’s legal action seeks declaratory and injunctive relief to prevent state agencies from enforcing preempted regulations.
In a significant escalation of the ongoing debate surrounding the legality of prediction markets tied to sports event outcomes, Kalshi initiated legal proceedings over the weekend. This move comes in direct response to cease-and-desist letters issued by gaming regulators in Nevada and New Jersey, asserting that their actions may not align with established federal regulations governing derivatives trading.
In a candid LinkedIn post on Sunday, Kalshi CEO Tarek Mansour articulated the company’s decision, framing prediction markets as “quintessential truth machines.” He emphasized their role beyond mere trading platforms, asserting that they harness key characteristics of free financial markets to pursue unbiased truth in the realm of sports betting and beyond.
Mansour expressed that the lawsuits represent a last resort after significant efforts to engage with regulatory bodies in both Nevada and New Jersey. He lamented, “We have made every effort to proactively educate these agencies about prediction markets and their regulatory framework, but our attempts have gone unacknowledged.”
As evidenced by trading activity on Kalshi’s platform, approximately $323 million in contracts related to the men’s NCAA Tournament had exchanged hands as of Monday morning, while contracts for the women’s tournament totaled around $56.3 million—a clear indicator of robust market interest.
Kalshi vs. New Jersey
Kalshi’s legal action targets New Jersey’s Division of Gaming Enforcement (NJDGE) along with Interim Director Mary Jo Flaherty and Attorney General Matthew Platkin, contesting the cease-and-desist orders issued last week. The lawsuit highlights two primary concerns raised by the NJDGE in their directives, which Kalshi contends are unfounded.
In its filing with the U.S. District Court in New Jersey, Kalshi asserts that the NJDGE’s demand to immediately terminate its New Jersey-based contracts would impose state regulations incompatible with federal oversight established by the Commodity Futures Trading Commission (CFTC). Kalshi argues that the Supremacy Clause of the U.S. Constitution supersedes state actions in this context, as Congress has legislated to fully occupy the field of futures derivatives regulation, thereby creating a clear conflict with federal policy.
Thus, Kalshi is seeking both declaratory and injunctive relief to prevent these agencies from enforcing what it describes as “preempted laws.” Furthermore, the company is requesting an emergency temporary restraining order and a preliminary injunction to avert immediate and irreparable harm that could stem from the NJDGE’s actions.
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