Kalshi chief says prediction-market fight could reach Supreme Court

Kalshi’s chief executive, Tarek Mansour, said the fight over whether states can regulate the company’s sports-event contracts could ultimately be decided by the U.S. Supreme Court, as conflicting federal rulings deepen uncertainty for prediction markets.

Speaking on the Reuters Econ World podcast, Mansour said Kalshi remained “very confident” in its legal position, though he declined to assess its chances if the justices take a case. He argued that the Commodity Exchange Act gives the Commodity Futures Trading Commission authority to decide how such contracts should be regulated.

Dozens of states have taken legal action over Kalshi’s sports-related trades. States contend the contracts are subject to gambling laws and taxes, while Kalshi says they are financial derivatives under CFTC supervision and should not face state oversight.

The central legal question has produced opposing results. On April 6, the Third Circuit upheld a preliminary injunction barring New Jersey from enforcing its law against Kalshi’s sports contracts. The court found that Kalshi had shown a reasonable likelihood that the Commodity Exchange Act pre-empts New Jersey law, concluding that the contracts are swaps traded on a CFTC-licensed designated contract market.

The ruling rested on the Dodd-Frank Act’s 2010 expansion of the CFTC’s exclusive jurisdiction over swaps and commodity-futures transactions on designated markets. The Third Circuit also noted that the agency can prohibit event contracts involving gaming if it finds them contrary to the public interest, but had not barred the contracts at issue.

Other courts have taken a different view. The Southern District of New York denied Kalshi’s request to block enforcement by the state Gaming Commission on July 7, holding that the company had not shown that federal law pre-empts New York gambling law as applied to its sports contracts. Kalshi is not licensed by New York to offer sports wagering.

The Ninth Circuit also ruled for Nevada, finding that the contracts are sports bets rather than swaps, according to Sportico. Its decision conflicts directly with the Third Circuit’s conclusion on federal pre-emption, creating a circuit split in which prediction-market operators face different legal rights and obligations in different parts of the country.

As we reported Oct. 12, Kalshi has until Nov. 9 to respond to New Jersey’s petition asking the Supreme Court to review the Third Circuit case. At least four justices must vote to grant review.

The dispute matters commercially for Kalshi because sports trades accounted for nearly 65% of its revenue, down from about 95% nine months earlier. The company’s valuation reached about $40 billion in a new funding round, according to people familiar with the matter.

A ruling for Kalshi could reinforce its effort to operate a broader trading platform across asset classes, while a loss could expose it to tighter state gaming controls and put sports-wagering profits at risk. Its market also offers yes-or-no contracts on outcomes beyond sports, including control of Congress after the midterms and the winner of the current season of “Dancing with the Stars.”