A federal court granted Kalshi a temporary restraining order and preliminary injunction as requested by the prediction markets site.
A statement read, “Plaintiff’s motion for TRO and preliminary injunction are granted in part.” The “in part” suggests the reprieve may only be temporary. The court will issue a written order with more details. Kalshi had to pay a $10,000 bond to grant the order.
A status hearing is set for April 30th, but it is an initial win for Kalshi in their fight against state regulators.
States against prediction markets
Kalshi had sued Nevada in response to a cease-and-desist letter sent last week. Nevada was the first state to issue the order over claims that Kalshi’s prediction markets are actually unlicensed sports betting. Since then, New Jersey, Ohio, Illinois, Maryland, and Montana have sent cease-and-desist letters to Kalshi. Robinhood and Crypto.com have also received similar letters from several states.
States have become frustrated by Kalshi continuing to offer sports event trading, and their offerings at March Madness were the catalyst for the backlash.
In a blog post introducing their sports event trading markets, Kalshi stated, “Of course, many states have already legalized sportsbooks. And that’s great, if you happen to live in a state that has them. But millions of Americans don’t. And for those Americans who do have access to legal sportsbooks, we offer a different product…an exchange, not a sportsbook.”
As the company classifies itself as “an exchange, not a sportsbook”, then it need not comply with state laws on sports betting. This also means that states with legal online sports betting cannot collect the high tax revenue. Kalshi continues to assert that they operate above state level and only the Commodity Futures Trading Commission (CFTC) has the authority to issue orders.
Prediction markets operate in a gray area of online sports betting along with sweepstakes and offshore sportsbooks.
Popularity of sports event trading
Kalshi CEO Tarek Mansour was not keen on the idea of prediction markets for sports events at first. “No one wants to trade on a bunch of grown men tossing around an inflated leather orb,” he said. “Let’s stick to NYC rainfall and hotdog prices.”
Yet, plenty of people do want to trade on a bunch of grown men tossing around an inflated leather orb. Super Bowl prediction markets traded over $27 million, and March Madness saw a betting volume of $412 million.
Many states prohibit betting on college sports, which could explain the popularity of NCAA prediction markets. The volume of trades must also have alerted states to the rise in popularity of Kalshi and forced gaming commissions into taking action.
For now, Americans, including in Nevada, can continue trading on Kalshi. Further news will come at the hearing on April 30th.
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