The Illinois Gaming Board sent cease-and-desist letters to Crypto.com, Kalshi, and Robinhood over claims that the trading platforms are engaging in illegal sports betting activities.
New Jersey, Nevada, and Ohio had previously sent similar orders in response to March Madness prediction markets. The four states claim these markets, where users can buy and sell predictions on sporting events, are nothing more than online sportsbooks.
The letter stated,
The IGB is aware that Kalshi is engaged in sports wagering activity in Illinois over the Internet and on mobile devices. The IGB has neither licensed nor authorized Kalshi to engage in sports wagering activity. Consequently, Kalshi’s activity constitutes illegal gambling in violation of Illinois law. Accordingly, Kalshi and anyone affiliated with its operations are directed to cease and desist this illegal activity. Failure to comply may subject Kalshi to civil or criminal penalties.
The full letter to Kalshi can be viewed here, and similar letters were sent to Robinhood and Crypto.com.
Sports betting in Illinois
Sports betting is legal in Illinois. The Illinois Sports Wagering Act in 2019 signed into law both in-person and online sports wagering. Initially, bettors were required to sign-up for online accounts in-person but that changed in 2022. Since then, users can register from anywhere in the state.
Online sportsbooks, however, require licenses. Kalshi, Robinhood, and Crypto.com do not hold the required Master Sports Wagering License (MSWL) from the IGB.
Even if they had a sports betting license, markets on March Madness would still be problematic. It is not allowed to place bets on in-state college teams. So, markets on University of Illinois Fighting Illini games would have fallen foul to regulations.
Kalshi continues to deny sports betting
In a response statement, Kalshi denied engaging in sports betting. The site also claims that it is a matter for the Commodity Futures Trading Commission (CFTC). The CFTC oversees Kalshi’s operations as a Designated Contract Market (DCM).
The statement read, “Kalshi has always been a staunch supporter of regulation. We were the first prediction market registered with the CFTC, a path we chose to ensure strong consumer protections and market integrity.
However, by attempting to encroach on jurisdiction clearly granted to federal authorities, state regulators are taking dangerous actions that would undermine trillions of dollars of economic activity across gold, oil, agricultural futures, and more. They threaten to upend a framework that has safely and effectively governed commodities markets for decades, which would be disastrous for the American economy.”
Kalshi has already sued New Jersey and Nevada following their cease-and-desist letters. We would expect Ohio, and now Illinois, to receive the same treatment.
How many states will join the backlash?
We reported that Connecticut also have an ongoing investigation into Kalshi activities, and more states may join the growing number taking action.
Other states, including Washington and Michigan, could follow with rumors they are also investigating the prediction markets.
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