Kalshi CEO says he was left with no choice but to sue New Jersey, Nevada regulators
Kalshi dramatically raised the stakes over the weekend in the battle over whether it operates a legal prediction market for sports event-based outcomes, filing lawsuits in response to the cease-and-desist letters sent by gaming regulators from Nevada and New Jersey.
In a LinkedIn post on Sunday explaining the decision to file, Kalshi CEO Tarek Mansour said prediction markets are more than simply places to trade contracts, calling them “quintessential truth machines”. He said they “mobilise the most elegant and effective properties of free financial markets towards the pursuit of unbiased truth”.
Mansour claimed filing the lawsuits against agencies overseeing two of the biggest regulated sports betting marketplaces in the US was a last resort of sorts. The post stated: “We have made every effort to engage proactively with both Nevada and New Jersey and try to educate them about prediction markets, how they are regulated and how critical they are… but our words fell on deaf ears.”
According to Kalshi’s website, $323 million worth of contracts for the men’s NCAA Tournament had been traded nationwide as of Monday morning. Another $56.3 million worth of contracts had been traded for the women’s NCAA Tournament.
Kalshi versus New Jersey
Kalshi’s lawsuit against New Jersey Division of Gaming Enforcement interim director Mary Jo Flaherty, New Jersey attorney general Matthew Platkin, and the New Jersey Casino Control Commission tries to address the two reasons the NJDGE sent Kalshi and Robinhood cease-and-desist orders last week.
In the filing with the US District Court in New Jersey, Kalshi argues that the NJDGE’s request to terminate its New Jersey-based contracts “immediately” would subject Kalshi to state regulations that the Commodities Futures Trading Commission (CFTC) was specifically created by congress to prevent. Using that distinction, Kalshi reasons that the supremacy clause of the Constitution preempts the NJDGE’s actions “because congress has occupied the entire field of regulating futures derivatives on CFTC-approved exchanges and because defendants’ acts would squarely conflict with federal policy”.
Kalshi is seeking declaratory and injunctive relief to prevent said agencies from “enforcing their preempted laws”. It also requests an emergency temporary restraining order and preliminary injunction to “avoid immediate and irreparable harm that would result from the defendants’ unlawful acts”.
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