The Closing Bell: Nevada Ramps Up Its Case Against Kalshi
Roundup: PredictIt federal case going away? Polymarket is being investigated in Australia. More from DraftKings, Fanatics on prediction markets. And Kalshi's latest 'gambling' marketing.
Editor’s note: A friend of the program, attorney Andrew Kim, graciously allowed me to syndicate his thoughts on the legal updates in Nevada in the Kalshi lawsuit to lead today’s roundup. Follow him on LinkedIn for more.
Signs of life in Nevada’s fight against Kalshi: Nevada files a sharp reply in support of its motion to dismiss, and the Nevada Resort Association asks to participate in the case.
First, the reply. I’ve been unforgiving about the quality of Nevada’s briefing up until now. Its opening motion to dismiss took an ineffective, scattershot approach that threw a bunch of arguments against the wall, hoping one would stick.
The reply is more focused. It hones in on what may prove to be an Achilles’ heel for Kalshi: economic consequence.
Here’s Nevada’s main merits argument,* in one sentence: Kalshi’s event contracts aren’t swaps because “[t]he outcome of sports games or elections do not have financial, economic, or commercial consequences independent of the participants.”
Truth be told, I don’t know if Judge Gordon can decide the “economic consequence” issue on a motion to dismiss — we’ll see just how well-pleaded Kalshi’s complaint is —but at least Nevada’s now fully in the right conversation. (The reply doesn't mention the Wire Act or other federal gaming laws, which is a good thing for Nevada.)
A potential forfeiture problem: the words “economic consequence” don’t appear anywhere in Nevada’s opening brief. The pivot had to have been a calculated gamble on Nevada's part.
(Quick legal writing aside: It wouldn’t surprise me if someone else led the drafting of this reply. The structure, tone, and wordsmithing look different from what we've seen before.)
Next, the Nevada Resort Association’s motion to intervene. The Association cites the competitive threat posed by sports prediction markets as its reason for participating in the case. The Association makes a solid case for intervention — frankly, Nevada might need the help, given that it started off on such weak footing.
The Association’s brief makes a compelling point — one I’ve also found troubling about Kalshi’s legal position. In my April 29 post on Event Horizon, I discuss how the Aron and Jones paper (cited in the New Jersey decision) posits that the Commodity Futures Trading Commission might have jurisdiction over “traditional sports bets” because they have the characteristics of swaps or event contracts.
The Association says, wait a minute, doesn’t that mean the CFTC might have jurisdiction over sportsbooks, too? “Kalshi’s preemption argument could even result in a bizarre result that the CFTC has authority over some types of state sports betting, not currently traded on a CFTC exchange.”
Kalshi might counter, “this case doesn’t present that question—this is about whether states can regulate event contracts being traded on a registered DCM; it’s not about whether sportsbooks are unregistered DCMs.” But Judge Gordon *COULD* interpret the Commodity Exchange Act in a way that might have implications for sportsbooks’ legal obligations under federal law. In my book, that’s a good reason for the Association to be concerned, and to jump in.
Suddenly, Nevada’s an interesting battleground again.
If you want to read the documents yourself, here are Nevada’s reply and the Resort Association’s filing:
We’ve also got an update on New Jersey’s appeal, h/t to attorney Dan Wallach for being on it first; from him: “New Jersey has asked the Third Circuit to expedite its appeal of the preliminary injunction granted to Kalshi because the ruling ‘interferes with NJ's ability to protect its citizens from unlawful sports wagering.’ Proposes that opening brief be filed by 6/10.”
Some more context from Kim here: “Re: Kalshi v. New Jersey. New Jersey's in a bit of a hurry, but not by much. They've maybe shaved off, what, 2-3 weeks? This is more like a ‘motion to issue a briefing schedule immediately.’ NJ also doesn't ask for a firm, no-extensions schedule—which Kalshi opposes, anyway.”
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The Closing Bell
A roundup of prediction markets news, analysis and other thoughts:
PredictIt federal case going away too?: On the heels of the CFTC ending its appeal against Kalshi on the latter’s ability to offer election betting, a federal case involving another prediction market, PredictIt might be over too. PredictIt had had a no-action letter from the CFTC for its political betting markets. But the CFTC withdrew it, and PredictIt went to court; more background here.
Here’s what was written in a “Joint Status Update” with a Texas federal court this week:
“Defendant Commodity Futures Trading Commission and Plaintiffs Kevin Clarke, PredictIt, Inc. and all the others submit this status update as required by the Court’s April 8, 2025, Order. Since the parties’ motion for a continuance of the hearing on pending motions (ECF No. 133), the parties have had productive discussions. The parties are continuing to engage in settlement discussions that could lead to a consensual resolution of this matter. The parties therefore jointly request an additional two weeks for those discussions to continue and propose filing a status report on Tuesday, May 20, 2025, on the status of efforts to bring this matter to a close through a consensual resolution and thereby spare the further consumption of judicial resources. During that additional requested period, the parties respectfully request that the Court continue to stay its consideration of the pending motions previously set for a hearing on April 11, 2025.”
Document here:
Meanwhile, some reaction from the interest group Better Markets on the vote by the CFTC to abandon the election betting case against Kalshi:
CFTC Commissioner Goldsmith Romero Casts Deciding Vote to Unleash Election Gambling, Undermining Democracy and the CFTC: “Dennis Kelleher, Co-founder, President and CEO of Better Markets, issued the following statement in response to the Commodity Futures Trading Commission’s (CFTC) 3-0 vote to drop its appeal in KalshiEx LLC v. CFTC: ‘This would be funny if it weren’t so serious: the Commodity Futures Trading Commission’s (CFTC) – not the Federal Election Commission or state gambling authorities – has unleashed nationwide online gambling on U.S. elections via so-called ‘event contracts’ and is now responsible for supervising, regulating, and policing that gambling, even though it has zero ability, expertise, capacity, or funding to do so. All of this is the result of the CFTC’s decision on Monday to drop its appeal in the KalshiEX LLC v. CFTC case (conveniently before Kalshi Board member and Trump’s CFTC Chair nominee Brian Quintenz has to face an as yet unscheduled Senate nomination hearing).”
And finally, a nice post from the New Finance Institute putting a bow on the Kalshi v. CFTC litigation: “Where do we go from here? It looks like the election markets are here to stay, for now. That said, we wouldn’t put much confidence into the longevity of these markets. Notwithstanding the dropped appeal, there were still some signs during oral argument (at the appeals stage) that the economic purpose test is alive and well. We believe that the issue will be re-litigated eventually, it’s too important. When that happens, we expect that the economic purpose test will be back at center stage. The true fate of event markets will be decided then. If you are Kalshi, you might want to run a prediction market on that. After all, unlike many of the markets that are available to traders on your platform today, that contract may have just enough purpose to get you over the hump when it comes to economic purpose.”
Tribal Gaming Experts: Sports Event Futures Are An ‘Existential Threat’ (InGame): “During a ‘New Normal’ webinar presented by the Indian Gaming Association (IGA) entitled ‘This Is Happening Now — How Prediction Markets Undermine Tribal Gaming Rights,’ tribal law experts warned that platforms like Kalshi offering sports wagering across the country are a threat to the foundation that Native American Gaming is built upon. ‘This is an existential threat,’ Scott Crowell of the Crowell Law Office Tribal Advocacy Group said. ‘We are not being alarmist.’ Jason Giles, executive director of the Indian Gaming Association, said that if sports futures continue to be allowed, it raises the question of why tribes should need to follow the Indian Gaming Regulatory Act (IGRA), which governs gambling on tribal lands. ‘If it’s gaming, it’s violating IGRA. And if it’s not gaming, then why are we following IGRA at all?’ he said.”
I don’t have much to argue with on any of these fronts. We’re careening toward a world where the questions are made-up, and the points don’t matter. Should tribes and tribal regulators just start doing whatever they want if the guardrails are gone?
SBC Summit panel on prediction markets: I was in Florida for SBC this week, but I was unforutantely scheduled to moderate a panel on a different topic at the same time as a prediction markets chat. Thankfully for me and all of you, Jess Welman did a great wrapup of what was said here:
‘As my clients watch this, they can’t do anything, and it’s frustrating,’ noted iGaming Capital CEO Melissa Blau. ‘Today, it’s predictions. Yesterday was sweeps. They’re still processing sweepstakes, now they have to deal with this. The reaction has been different for different tribes, for different clients, depending on how knowledgeable they are. Most are not knowledgeable. They don’t know this headwind that is about to be taken away from them. But the problem is, the ones that do know can’t do anything about it.’ Blau argued the legal debate about whether or not sports-related event contracts are legitimate is largely academic. Also, given the composition of the administration and that the nominee for the chair of the Commodity Futures Trading Commission (CFTC), Brian Quintenz, is also a Kalshi board member, she believes the writing is already on the wall.”
Illegal crypto-betting website Polymarket under investigation by online media regulator (Crikey): “Illegal betting website Polymarket is being investigated by Australia’s online media regulator, after the company began courting users by paying local creators to promote its website during the federal election. … Last month, Crikey reported that the platform was paying Australian Instagram and TikTok creators to create content using Polymarket’s odds to promote the website. At the time, the Australian Communication and Media Authority (ACMA) said it had not been aware of Polymarket but would consider an investigation. A spokesperson for ACMA has now confirmed that the regulator has initiated an official probe. ‘The ACMA has opened an investigation into the provision and advertising of the Polymarket service,’ an ACMA spokesperson said in an email.”
DraftKings talks prediction markets again: Here’s a trascript of CEO Jason Robins speaking at the MoffettNathanson Media, Internet & Communications Conference:
Question: So let's switch gears a little bit. Talk about another point of questions, what we're getting a lot from investors and focus on the prediction market. The fact that offering these event-based contracts on sporting events seem to be some sort of competition, whether deemed legal or not. So curious, with these platforms seemingly gaining traction, do you view them as a competitive threat to your business?
Robins: I wouldn't say it's a threat to our business. I think that any sort of new opportunity can always be perceived that way. But I look at it more opportunistically. I think another really important element people have to appreciate about this is that this is creating real urgency, I think for states. All of a sudden, if you're a state that hasn't taken action yet, this is a very compelling reason that you would want to establish a state regulated framework. So I think anything that kind of forces that issue creates new opportunities to offer products in markets that are not available right now is a good thing. Obviously we're watching closely and we'll see how it plays out. I know there's court cases and other things going on, but something we're definitely keeping an eye on.
Question: Can you help us think about what the impact to pricing is for DraftKings because that seems to be another point of contention at least if that really starts to impact the way that you have to price, given that they're obviously not taxed?
Robins: Yes. I think that there's different ways of looking at pricing, right? I mean those are two sided marketplaces. So you don't know who you're going up against. And a lot of times the lines that are being offered might be getting skewed by sharp bettors and others that aren't necessarily getting the action that they want on our product. So it really is a different experience in many ways. I can see why in a state that doesn't have legal betting, it's a substitute because there's just nothing else, right? But if you look at the products, they're very nascent one and don't have any of the bells and wheat whistles. They're very bare bones in terms of markets. Now, that'll change. But creating things like parlays for example, this is going to be hard in a format like that. It's peer to peer. So it's a different thing. Concepts like odds boost and stuff like that don't really exist. So I do think that having other options for people ultimately will have some effect. But I don't think it's apples to apples enough that you're going to be able to say okay there's some impact directly on pricing or anything like that. I mean again I think it's something where we — it's so early days in terms of how this is going to play out with the federal government, the court cases, states. It's too early for us to say this is the best way if any, for us to play in that space or even how it's going to ultimately play out. But it's something we're watching. We understand that it's important for us to have various approaches and strategies in place depending on how things unfold.
My take: Again, I question/reject two things that I am hearing a lot from the gambling industry. 1. That the product can’t one day be as robust as state-regulated sportsbooks. I think if things continue on this path, it could in many ways replicate or be a pretty close comp for a sportsbook. And 2. that states will start legalizing sports betting because it’s at Kalshi. On the latter point, it could actually end up being a deterrent. What I do think is interesting is showing states the nationwide product and asking to make things less onerous — lower taxes and/or result regulatory burdens — for operators in a world where they have to compete with nationwide sportsbooks.
Fanatics Not Fanatical About Prediction Markets, Has No Plans To Launch One (InGame): “Fanatics Betting & Gaming currently has no interest in launching a prediction market, Chief Business Officer Ari Borod said Wednesday at the SBC Americas Summit 2025. “What are event contracts?’ Borod quipped when asked whether Fanatics would add new verticals to its sports betting and online casino offerings.”
Today in questionable Kalshi marketing initiatives:
Kalshi is using “creative” language to say you can bet (“legallly put money”) on the NBA in Georgia on Instagram, where sports betting is not legal:
I asked ChatGPT “What do you think ‘legally put money on’ a basketball game means?” The answer: ‘The phrase ‘legally put money on’ a basketball game means placing a legal bet or wager on the outcome of that game. In other words, someone is gambling on the game through a method that is permitted by law — such as using a licensed sportsbook, casino, or an approved online betting platform — depending on the laws of the country or state they are in. So, ‘legally put money on’ = make a lawful bet.'“
Kalshi also apparently inked an influencer/content/affiliate(?) deal with satirical personality Club Pro Guy. More on Twitter and on his site.
From the Twitter/X video: “Kalshi is the only place where I can wager on really stupid things…” I think he meant “trade on serious financial instruments.”
Site (emphasis added): “More exciting news – we’ve partnered with Kalshi, a prediction website that allows you to invest (cough, cough) wager on the outcomes of all kinds of events – including professional golf!”
“We can’t control what he says about us!” — Kalshi, probably.
CFTC happenings: Since the CFTC is the de facto regulator of nationwide sports betting, just about anything that happens at the CFTC is news. A few interesting pieces of news this week:
Judge sanctions CFTC over agency's conduct in My Forex Funds case (Reuters): A federal judge in Camden, New Jersey has thrown out a Commodity Futures Trading Commission lawsuit against a U.S.-Canadian trading firm after finding that the U.S. agency acted in bad faith and made false statements, according to a docket entry on Wednesday.
U.S. District Judge Edward Kiel dismissed the CFTC's 2023 case against Traders Global Group, also known as My Forex Funds, and awarded the company attorney fees as a sanction. … Acting CFTC Chairman Caroline Pham said in a statement that the agency’s conduct was ‘inexcusable.’ ‘The CFTC must now accept accountability so that appropriate corrective action can finally be taken to address the conduct issues, and the CFTC can put this behind us and move forward to restore the agency's credibility and reputation,’ Pham said.”
Full statement from the CFTC here.
Not exactly the kind of thing you want from a national sports betting regulator, if we’re being honest.
CFTC commissioner leaving agency to head up crypto trade group (The Hill): “Commodity Futures Trading Commission (CFTC) Commissioner Summer Mersinger is leaving the agency to lead the Blockchain Association, the crypto trade group announced Wednesday. Mersinger, who has spent the last three years at the agency, will take over as CEO of the Blockchain Association as its longtime CEO Kristin Smith leaves to head up a new crypto nonprofit.”
Mersinger’s official statement here.
Then just before I published, we learned that Christy Goldsmith Romero is leaving at the end of the month; statement here.
That could potentially leave the CFTC with just two of its usual five commissioners in place. The nominee to chair the CFTC, Brian Quintenz, has not yet been confirmed. Acting Chairman Caroline Pham appears to be ready to depart as well as soon as Quintenz takes over (assuming he is confirmed). Again, none of this seems ideal as the commission is tasked with overseeing the future of sports betting in all 50 states. Maybe it’s good if you value fresh perspectives, but the new folks will still have a ton to do just getting onboarded.
Interesting random thought from pro sports bettor Rufus Peabody (Twitter): “Prediction markets use minimum price increments (tick sizes) to prevent traders from undercutting market makers, but Kalshi’s 1 percent ticks produce absurd pre-tourney spreads (e.g. −9900/+4900), leaving most golfers untradeable pre-tournament. Sporttrade and ProphetX use smaller increments, but still max out around 250/1. By contrast, Ryan Gerard was available at 999/1 on Betfair. Introducing finer tick sizes would unlock liquidity across the entire field and dramatically improve the trading experience.”
Ridiculous things you can
bettrade on at prediction markets:Polymarket edition: “Trump says Moon Landing faked in 2025?” Okay, then. Who is hedging on this, the Man on the Moon? NASA?
Kalshi edition: Self-certified but not listed, “Will the next new Mac OS name be ‘name.’”
If you want to gaslight me by saying this has any kind of economic/hedging utility in the real world, please rethink your life choices. It’s just something silly to bet on.
I am discontinuing the sports market update for now. If you’re dying for that, please email me to let me know. Otherwise I am just going to note when major new markets are added, ie see below.
Other things I have published this week on prediction market
Numbers Say Kalshi Continues To Be A Sports Betting App
The “bet on anything” app is largely a sports betting app as Kalshi has continued to expand its sports event offering, data from the prediction market platform shows.
Kalshi Expands Sports Betting Menu With Win Totals Markets
Kalshi has self-certified win totals markets with the Commodity Futures Trading Commission, another step as it expands the menu of things users can bet on at the prediction markets platform.