Lawyers at Dawn: Kalshi Sues Nevada and New Jersey Regulators

Kalshi doesn’t intend to go away quietly.

The prediction market ratcheted up the intensity in its legal battle with regulators in New Jersey and Nevada by filing lawsuits last week in response to cease-and-desist orders.

In a company filing, Kalshi CEO Tarek Mansour called prediction markets a “critical innovation of the 21st century” and accused both the New Jersey Department of Gaming Enforcement and the Nevada Gaming Control Board of overstepping their boundaries.

“Both states have issued cease and desist orders that fundamentally misunderstand prediction markets and undermine the foundation of U.S. financial markets, which are regulated by the federal government,” Mansour posted on X (the social media site formerly known as Twitter) on Sunday.

“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.

“I can’t speak to why they are taking this action, but prediction markets have proven their use, so it is a shame that these authorities are still trying to censor them.

“We are left with no choice: sue.”

This follows attempts by Nevada and New Jersey to block Kalshi and fellow predictive market Robinhood from offering sports prediction markets in their states. Sports betting is now legal in 38 states plus Washington, D.C., though Kalshi is accessible throughout the U.S.

Kalshi introduced its single-game betting markets for the NCAA men’s and women’s basketball tournaments on March 17, including in states like New Jersey where wagering on in-state schools is prohibited. The markets are offered via an exchange rather than “against the house.” Ironically, Newark, NJ., was a regional host site on the men’s side this past weekend.

Through the first two rounds of the men’s tournament, Kalshi took in almost $200 million. Another $12.8 million was spent on the women’s side.

The company also announced a partnership with Robinhood, whose first foray into sports came earlier this year with Super Bowl 59.

The NJDGE has threatened further action should Kalshi not comply with its orders to leave the state, including potentially “any measures available under state law.” It recently agreed to extend the deadline for compliance to its cease-and-desist letter to April 7.  

Kalshi claims its sports-outcome contracts don’t constitute gambling, and that its event contracts are “valid under federal law.” The company argued that compliance could lead to issues on the open market.

“Prediction markets are a critical innovation of the 21st century and, like all innovations, they are initially misunderstood,” Mansour said.

Nevada’s cease-and-desist orders represented the first legal action taken against Kalshi at the state level. The Nevada Gaming Control Board accused the company of violating several state laws with its sports and election offerings.

On Monday, the Ohio Casino Control Commission also issued a cease and desist letter to Kalshi, Crypto.com, and Robinhood stating: “The commission determined the event contracts offered by the companies on sporting events meet the definition of sports gaming under the law, which requires licensure to be legally offered in Ohio.”

Mansour promised to continue fighting in favor of predictive markets for the betterment of the American public. So we can expect Kalshi to return fire and sue Ohio as well.

“They are the quintessential truth machines,” he said. “With trust in traditional institutions at an all-time low, people are turning to prediction markets at an astronomical pace. The growth of the ecosystem in the last year is a testament to how important they have become to the American people.”