Kalshi Sues Ohio; Pennsylvania Regulator Warns Congress On Prediction Markets
Add another state to the list where Kalshi is involved in a lawsuit about whether its prediction market offerings constitute illegal sports betting.
Kalshi filed a lawsuit in federal court against Ohio officials on Tuesday; the prediction market company is asking for an injunction to prevent Ohio from enforcing its law. The state contends that Kalshi is offering sports betting without a license.
The contours of the case are similar to lawsuits in other states. Kalshi has sued state officials from Nevada, New Jersey and Maryland in an attempt to block similar actions. The Massachusetts attorney general has also filed a lawsuit to try to prevent Kalshi from offering sports betting in its state.
The Ohio Casino Control Commission had sent cease-and-desist letters to Kalshi, Robinhood and Crypto.com in the spring, telling them to stop offering sports event contracts in the state. But there had been no public enforcement actions, and all of the operators continued to offer sports event contracts in Ohio.
Per the complaint, Ohio had given Kalshi a deadline of Oct. 20 for enforcement; that led Kalshi to file the lawsuit months after the initial cease-and-desist letter.
From the complaint:
“Two Ohio agencies seek to prevent Plaintiff KalshiEX LLC (“Kalshi”) from offering event contracts for trading on its federally regulated exchange. They do so both by threatening Kalshi with imminent criminal penalties for offering these contracts, and by threatening to revoke the license of any entity that partners with Kalshi anywhere in the United States. Ohio’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges. The state’s efforts to regulate Kalshi are both field-preempted and conflict-preempted. This Court should therefore issue both a preliminary and a permanent injunction, as well as declaratory relief.
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In August, Ohio also sent a letter to licensees in the gaming industry warning that involvement in sports betting via prediction markets could put their licenses in jeopardy. Kalshi’s complaint mentions that letter and alleges that it caused harm to the company.
A few interesting things from the complaint on the timeline of events (verbatim from the complaint):
On August 19, 2025, the Casino Commission replied to Kalshi by ordering Kalshi
to respond to multiple factfinding demands, including demands for information about Kalshi’s communications with the CFTC. The Casino Commission also referenced a decision issued on August 1, 2025, by the U.S. District Court for the District of Maryland on denying Kalshi a preliminary injunction… The Casino Commission demanded that Kalshi respond within 30 days—no later than September 18, 2025.
At Kalshi’s initiative, on September 25, 2025, Kalshi’s counsel participated in a call with representatives of the Casino Commission, the Ohio Attorney General’s Office, and an outside litigation law firm retained by Ohio, to discuss Kalshi’s September 18 response letter. On that call, a representative for the Casino Commission indicated that the Casino Commission would respond to Kalshi’s letter in writing but that it was unlikely to further extend the deadline for compliance with the cease-and-desist letter.
The Casino Commission sent Kalshi a letter on October 6, 2025. In that letter, the Casino Commission noted that it “is unpersuaded that Ohio law is preempted by federal law as Kalshi contends,” and that if “Kalshi chooses to continue to offer unlicensed and unregulated sports gaming in the form of sporting event contracts within Ohio, Kalshi will be violating Ohio law.” The letter also refused to withdraw the Sports Gaming Licensee Letter threatening Kalshi’s partners. The letter demanded that Kalshi comply with the Casino Commission’s cease-and-desist letter “by no later than October 20, 2025,” and threatened that if Kalshi declines, “the Commission will be forced to address such violation of law directly.”
On the morning of October 7, counsel for Kalshi informed counsel for the Casino
Commission of Kalshi’s intent to file this complaint and to seek preliminary relief.
Full complaint here:
Included in the filings is a letter from the OCCC to Kalshi’s attorneys dated Oct. 6:
Prediction markets news roundup
PA regulator warns Congressional delegation on prediction markets (press release): “The Executive Director of the Pennsylvania Gaming Control Board (‘PGCB’) has written a letter to the Commonwealth’s two U.S. Senators and 17 members of Congress regarding the concerns of widespread sports wagering through “event contracts” on privately established futures markets.”
“Specifically, the letter asks Pennsylvania’s representatives to urge the Commodity Futures Trading Commission (“CFTC”) to consider the inherent problems caused by a dual-track system of state-regulated legal sports wagering and purported futures trading on sporting events under the facade of federal regulation. The letter follows an earlier (April 2025) submission of written testimony to the CFTC on behalf of the PGCB.”
“In his letter, Kevin F. O’Toole states that the growing presence of sports prediction markets is a significant threat to Pennsylvania’s long-established regulatory framework for gaming and undermines the successful regulation of gambling that has been historically, and constitutionally, left to individual states.”
“Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law,” O’Toole writes. “These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight.”
“The ability of all states to offer sports wagering was established after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act in May of 2018. Immediately thereafter, Pennsylvania moved to offer sports wagering products only through vetted and qualified licensees to bettors who were of legal age (21), and supported through implementation of strict but fair regulations on the operators.”
“O’Toole further states in his letter that such consumer protections are not required through futures markets since firms that offer sports wagering under the primary jurisdiction of the CFTC are not required to do so. The CFTC is a federal regulatory body historically overseeing markets where participants have been large and astute investors, not individuals as young as 18 seeking to “invest” in the outcome of a football game. To make matters worse, these prediction markets are typically self-certified by the private entities as compliant with federal law making them widely available with no review by the CFTC.”
“The jurisdictional clash carries a significant risk of resulting in inconsistent and inadequate regulation,” O’Toole adds. “The CFTC’s framework is designed for derivatives markets often involving sophisticated institutional participants. In contrast, state gaming regulators prioritize consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention.”
“With all due respect to the CFTC, it would take years for them to create the regulatory system and oversight that state gaming authorities have in place, which would also create a redundancy for a system that already exists and works exceptionally well.”
“O’Toole concludes that the continued availability of sports wagering through these commodity markets would create a parallel wagering ecosystem in which bettors may assume they have adequate protection, but do not, while offering significantly less oversight regarding potential match-fixing or the exploitation of insider information.”
“Even worse,” O’Toole concludes, “the parallel tracks risk confusing patrons who engage in these markets by utilizing the veneer of a highly regulated market when, in reality, their markets are more akin to the ‘wild west’”
My take: State regulators reaching out to their delegations in Congress will be an interesting development if it happens in more states. Increasing political pressure could make confirmation of the next Commodity Futures Trading Commission chairman more difficult, or create a need for Acting Chair Caroline Pham to address the issue.
MetaMask Will Add Polymarket Prediction Markets, Rolls Out Perp Trading With Hyperliquid (Coindesk): “MetaMask, the popular crypto wallet developed by Consensys, is moving deeper into crypto trading and speculation, adding perpetual swaps trading and announcing plans to add Polymarket prediction markets to its platform. The firm said on Wednesday the Polymarket integration will come later this year as part of an exclusive partnership, allowing users in approved regions to access onchain prediction markets directly in its app. Users will be able to bet on real-world outcomes from elections to crypto price movements without giving up custody of their assets.”