Betting or Predicting? Kalshi’s Legal Gamble Could Reshape the Industry
When you’re operating at the intersection of finance, tech, and regulation, you’re bound to ruffle some feathers. And that’s exactly what Kalshi, a bold startup in the prediction market space, is doing right now.
Last week, Kalshi filed lawsuits against New Jersey and Nevada after both states attempted to shut down the company's new sports trading platform. Kalshi argues that since it’s regulated at the federal level by the Commodity Futures Trading Commission (CFTC), state authorities have no jurisdiction over its operations.
“We’re not too worried. We’re regulated federally,” Kalshi CEO Tarek Mansour said during a recent StrictlyVC event in San Francisco. “State laws don’t really apply.”
Why This Case Matters for the Future of Sports Prediction Markets
If Kalshi prevails in these legal battles, it won’t just safeguard its current business—it could also open the floodgates for innovation in the sports betting sector, potentially altering how Americans interact with sports speculation altogether.
But this showdown isn't just about sports. It's a power struggle between state regulators and federal oversight, with ties that reach all the way into Trump-era policies.
This isn’t Kalshi’s first run-in with regulators. The startup previously took on the CFTC in a high-profile case—and won. That victory gave it the green light to operate political prediction markets, enabling over $1 billion in trades surrounding the 2024 U.S. elections.
Reflecting on the legal journey, Mansour said candidly, “We’ve had to eat a lot of [expletive] over the last five years. I’d do it again in a heartbeat.”
In January, Kalshi made headlines by launching markets that let users predict outcomes for major sporting events like the Super Bowl and March Madness—even in states where sports gambling is technically off-limits.
But the move drew swift backlash. Six states—including Nevada, New Jersey, Illinois, Maryland, Ohio, and Montana—sent cease-and-desist letters, arguing that Kalshi’s markets amount to unlicensed sports betting.
Mansour’s response? “We’re fully licensed—by the CFTC,” he insisted.
He also hinted at deeper motives behind the crackdown, citing pressure from casino lobbies that aren’t happy about the new competition.
First Legal Victory: Kalshi Gets a Temporary Green Light in Nevada
In a promising turn, a federal judge ruled in Kalshi’s favor on Tuesday, allowing the platform to continue operating in Nevada—at least while the court case plays out.
This win gives Kalshi breathing room and potentially sets a precedent for how prediction markets are regulated across the U.S.
Are Prediction Markets the Same as Gambling?
That’s the million-dollar question. Regulators tend to say yes. Kalshi says no.
Mansour argues there’s a key difference: gambling, he says, involves betting on arbitrary outcomes—like rolling dice. Prediction markets, on the other hand, allow users to speculate on real-world events, much like derivatives trading in financial markets.
These markets, he claims, help investors and analysts assess risk, something traditional gambling doesn’t provide.
To prove his point, Mansour cited Kalshi’s market on the TikTok ban. “There wasn’t really a way to price the odds of something like that before. Now, with prediction markets, there is.”
Kalshi’s rise hasn’t gone unnoticed in Washington. In January, Donald Trump Jr. joined the company as a strategic advisor. A month later, former Kalshi board member took the reins at the CFTC, appointed by President Trump. By March, Kalshi’s lead legal counsel had jumped ship to work alongside Elon Musk’s DOGE initiative at the Securities and Exchange Commission.
While Mansour publicly downplayed any political favoritism, he didn’t shy away from praising the administration’s pro-innovation stance when it comes to financial technology.
Kalshi’s Market Value and the Road Ahead
With a current valuation pegged at $787 million (according to PitchBook), Kalshi is already a heavyweight in the emerging space of prediction markets. But if it manages to secure its place in the sports trading ecosystem, that number could surge even higher.
The outcome of these lawsuits won’t just shape Kalshi’s future—it could redefine the regulatory landscape for prediction platforms nationwide.
Watch the full interview here.