Kalshi sues Nevada and New Jersey regulators over cease-and-desist orders

Kalshi, a pioneering platform in the prediction market sector, has recently escalated its legal confrontations with regulatory bodies in Nevada and New Jersey by initiating lawsuits following cease-and-desist orders issued against it. This move underscores a significant tension within the burgeoning landscape of prediction markets, which, according to Kalshi’s CEO, Tarek Mansour, represent a “critical innovation of the 21st century.”
In a recent post on X (formerly known as Twitter), Mansour expressed sharp criticism toward the Nevada Gaming Control Board and the New Jersey Department of Gaming Enforcement. He articulated that their actions reflect a fundamental misunderstanding of prediction markets and threaten the foundational principles of U.S. financial markets, which are governed at the federal level.
Mansour stated, “Both states have issued cease and desist orders that fundamentally misunderstand prediction markets and undermine the foundation of U.S. financial markets.” He elaborated that despite Kalshi’s efforts to engage proactively with both regulatory bodies to provide education on prediction markets and their federal regulation, those efforts have been largely ignored. "What is disheartening is that prediction markets have proven their utility, yet these authorities persist in their attempts to suppress them," he concluded, emphasizing the necessity of legal action.
Kalshi and Robinhood Face Regulatory Challenges in Key Markets
Kalshi’s legal challenges have emerged against a backdrop of broader scrutiny, particularly with fellow predictive market platform Robinhood facing similar threats from regulators in both Nevada and New Jersey. Both states have targeted these platforms in an attempt to restrict their operations in offering sports prediction markets.
Recently, Kalshi introduced single-game betting markets for NCAA basketball, which proved to be financially lucrative, generating nearly $200 million in revenue during the early rounds of the men’s tournament alone, alongside an additional $12.8 million from women’s events. Moreover, Kalshi’s partnership with Robinhood facilitated the launch of sports markets tied to notable events like Super Bowl 59, further solidifying its presence in the competitive landscape.
Despite Kalshi’s economic successes, regulators have doubled down on their efforts. The New Jersey Department of Gaming Enforcement (NJDGE) has threatened potential punitive actions should Kalshi disregard their orders, while granting an extension for compliance until April 7th.
Defending Prediction Markets Against Regulatory Opposition
In defending Kalshi’s operational framework, Mansour asserted that their sports-outcome contracts do not fit the legal definition of gambling and are, therefore, “valid under federal law.” He further highlighted the transformative potential of prediction markets, categorizing them as valuable tools for information aggregation and forecasting.
Nevada’s cease-and-desist order marks the first state-level conflict with Kalshi. The Nevada Gaming Control Board (NGCB) alleges that Kalshi has breached multiple state regulations related to gaming operations. A similar stance has been taken by the Ohio Casino Control Commission, which issued cease-and-desist letters to Kalshi, Robinhood, and Crypto.com, asserting that the companies’ event contracts constitute illegal sports gambling under Ohio law.
Despite these legal hurdles, Mansour remains steadfast in advocating for prediction markets. He describes them as “the quintessential truth machines” that serve critical societal needs, particularly in an age when public trust in traditional institutions has waned.
Understanding Kalshi: A Deep Dive into Prediction Markets
Launched in July 2021, Kalshi positions itself as a robust platform enabling both retail and institutional investors to trade on a variety of future events—from economic indicators to political outcomes and sports results. The platform operates on a binary trading model where contracts are priced based on market assessments of probable outcomes, typically varying between a 0% to 100% probability range.
Exploring Kalshi’s Esports Markets
In addition to traditional sports markets, Kalshi has ventured into esports, a rapidly growing sector within the gambling industry. Currently, the platform offers a market tied to the League of Legends World Championship, where T1 leads as the frontrunner with a 28% probability of success, followed closely by Hanwha Life Esports at 21% and GenG at 12%.
Together, these developments depict Kalshi’s commitment to innovation in the gambling space, even as regulatory challenges loom large. The ongoing legal disputes illustrate the growing pains of prediction markets as they navigate a complex regulatory landscape that is still coming to terms with the implications of such groundbreaking financial innovations.