TLDR
- Kalshi CEO Tarek Mansour warns that legal disputes could push U.S. prediction markets offshore.
- State regulators challenge Kalshi’s sports contracts, arguing they fall under state gambling laws.
- Federal appeals courts remain divided over whether states or the CFTC should regulate prediction markets.
- The CFTC seeks stronger federal oversight through new rules covering prediction market event contracts.
- Mansour rejects allegations of inflated trading volumes, attributing repeated transaction sizes to market makers.
Kalshi chief executive Tarek Mansour said Wednesday that legal challenges could push U.S. prediction markets overseas. Speaking at DC Fintech Week near Washington, he argued that federal oversight offers a path for event trading. Several states disagree, saying sports contracts fall under their gambling laws.
U.S. Prediction Markets Face State Challenges
Mansour said sports outcomes carry economic consequences and defended Kalshi’s treatment of event contracts as financial products. He said the Commodity Exchange Act gives federal regulators authority over markets that extend beyond traditional commodities.
State officials argue that contracts tied to game results amount to sports betting. They have taken Kalshi and other operators to court, seeking to apply state gambling rules. The NFL has backed New Jersey’s Supreme Court appeal. The league also raised concerns about consumer protections and game integrity.
Federal appeals courts have reached decisions. One ruling supported Kalshi’s federal oversight argument, while two others favored state authority. The justices have not agreed to hear New Jersey’s case. Kalshi must respond to the petition by November 9.
CFTC Seeks Stronger Federal Authority
Kalshi and the Commodity Futures Trading Commission argue that federal law gives Washington authority over event contracts.
“It’s a choice of whether prediction markets exist in the U.S. or whether they go offshore,” Mansour said.
On October 9, the agency proposed treating prediction market event contracts as swaps. That category falls under federal derivatives law. A separate interim rule excludes casino-style games from the swap definition, drawing a line between regulated contracts and gambling.
The proposed change covers contracts linked to sports, politics, weather and culture. It remains subject to the rulemaking process. The Supreme Court petition also remains pending, leaving companies and state regulators to contest the current legal framework.
Kalshi Addresses Trading Volume Questions
More firms are seeking U.S. market access. Last week, Blockchain.com applied for two CFTC licenses to offer U.S. prediction markets and crypto derivatives. Mansour faced questions about repeated transaction sizes in Kalshi’s Bitcoin and Ether perpetual-futures markets.
He rejected claims that those patterns showed inflated volume. Mansour said market makers place fixed-size orders, which can produce repeated trade amounts. He criticized speculation about the figures and said trading activity can be difficult to interpret without understanding how orders work.
