Prediction market exchange Kalshi is now offering events contracts akin to single-event sports contracts ahead of March Madness.
March Madness is America’s largest single-elimination tournament, and Kalshi has selectively phrased markets asking which team will win certain “tournaments” that effectively mean single games.
The Controversy Behind Kalshi’s “Legal” Sports Betting in 50 States
Kalshi is no stranger to taking wagers on the NCAA landmark event, but it normally only offers contracts for the overall winner. The company has aggressively been pursuing a sports events product similar to a market offered by a traditional or crypto sportsbook.
The company gained headlines when offering political betting on 2024’s Presidential Election that saw President Donald Trump reelected for a second term. It was initially prohibited by the regulator for events markets, the Commodity Futures Trading Commission (CFTC). Subsequently, Kalshi won an appeal and was permitted by a court of law to offer markets.
It is unlikely that single-event sports contracts will reach anywhere near the numbers seen wagered on the Presidential Election. Still, the company continues to attract unwanted attention from gambling industry stakeholders and state lawmakers.
In the lead up to the most recent Super Bowl between the Kansas City Chiefs and Philadelphia Eagles, Kalshi pushed sponsored advertising across the United States of America, claiming to be the only way to legally wager on sports in 50+ states.
Traditional sportsbooks such as DraftKings and FanDuel must obtain a sports betting license on a state-by-state basis and adhere to specific state regulations. In addition, operators must pay application fees, licensing fees, and tax in each state where they have received a license.
DraftKings Could Enter the Prediction Market Shortly
Recent developments show key industry stakeholders are watching carefully. DraftKings has filed to register ‘DraftKings Predict’ with the National Futures Association (NFA).
Should the company gain regulatory approval, DraftKings would be able to start offering event-based betting markets. Given the company’s vast existing customer-base, this could prove detrimental to Kalshi’s overall market share.
Although DraftKings has not made plans to compete publicly in prediction markets, Jason Robins confirmed suspicions that the company was closely monitoring the industry on an earnings call. “It’s certainly something that we have keen interest in seeing how it plays out,” he told investors on the company’s fourth quarter earnings call.
Kalshi’s Legal Challenges Mount as Nevada Regulators Push Back
Kalshi has recently received a cease and desist letter in Nevada. The company is accused of violating multiple statutes and Nevada Gaming Commission regulations.
The company must cease all unlawful activity by 5 p.m. on 14 March 2025. The letter explains that past actions are still subject to civil and criminal penalties, and any future activity will be deemed “willful violations.”
Nevada Gaming Control Board Kirk Hendrick explained: “Every sports pool in Nevada must undergo an extensive investigation prior to licensing, must adhere to strict regulation once licensed and must pay all applicable taxes and fees.”
He continued: “Any unlawful attempts to circumvent Nevada’s right to regulate gaming activity within its borders will be met with the full force of criminal and civil penalties.”
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