Federal Court Says State Gambling Laws Govern Kalshi Contracts as Platform Tops $1 Billion in Super Bowl Trades
Updated
Updated · The American Prospect · Jul 15
Federal Court Says State Gambling Laws Govern Kalshi Contracts as Platform Tops $1 Billion in Super Bowl Trades
3 articles · Updated · The American Prospect · Jul 15
Summary
A federal court in New York ruled last week that state gambling regulations apply to Kalshi’s event contracts, undercutting the platform’s argument that federal commodities law alone governs the market.
The decision hits the center of a broader jurisdiction fight in which the CFTC has argued it has exclusive authority over prediction-market contracts and has moved under Trump appointee Mike Selig toward a more permissive stance.
Kalshi’s sports business has grown rapidly amid that shift: the platform handled more than $1 billion in Super Bowl event-contract trading this year, over $545 million tied to the Masters, with sports accounting for about 90% of activity.
Consumer and legal critics say those contracts function as gambling rather than hedging or price discovery, pointing to a Roosevelt Institute estimate that users lost $583.5 million on Kalshi from July 2021 to May 2026, including $371.6 million on sports wagers.
The ruling is likely to be appealed and could help push the clash between federal regulators, states and prediction-market operators toward the Supreme Court.
As military secrets become betting topics, can regulators stop the rise of national security insider trading?
Are prediction markets the future of finance or simply casinos disguised as commodity trading?
$1 Billion at Stake: The Legal and Regulatory Battle Over Kalshi and the Future of U.S. Prediction Markets
Overview
The report highlights the escalating legal and regulatory battles over prediction markets like Kalshi, focusing on whether these platforms are federally regulated financial exchanges or state-regulated gambling. Recent court rulings, such as the New York federal court's denial of Kalshi's immunity from state gambling laws and the divided opinions in the Third Circuit, show deep judicial disagreement. States are aggressively asserting their authority, while Kalshi continues to appeal decisions and expand its market presence. Meanwhile, Congress is split, with new legislative proposals aiming to clarify or restrict prediction markets. With mounting lawsuits and conflicting rulings, the issue is likely headed to the U.S. Supreme Court for resolution.