The fight against prediction exchanges continues to rage.
Ohio Attorney General Dave Yost, along with AGs from more than 30 states, filed an amicus brief Tuesday imploring the US Court of Appeals to side with New Jersey in its lawsuit levied by Kalshi, a prediction exchange that enjoys federal protection.
The states contend that Kalshi, and other financial exchanges that trade on the outcome of real-world events – including sporting events – should have to adhere to states' online sports betting regulations.
Joining the fight
Prediction platforms, or exchanges, offer a variety of markets, recently including ones involving professional sports. Users purchase contracts associated with possible outcomes, such as if the Indiana Pacers or Oklahoma City Thunder will win the NBA finals.
Winning contracts mimic winning wagers and result in payouts for customers.
Kalshi sued New Jersey after state gaming regulators looked to block Kalshi from accepting contracts in New Jersey that involved sports.
This week, Yost and 36 other state attorneys general filed the amicus brief – a legal document filed by someone not directly involved but with a strong interest in a case – as a show of support for New Jersey and all their states' ability to regulate sports betting that takes place inside their borders.
Yost said the brief was filed to protect sports bettors.
“States rightfully have the ability to protect their citizens from the negative consequences of online gambling, no matter how it’s packaged. We’re protecting the unprotected.”
States vs. feds
A New Jersey federal judge on April 28 granted Kalshi’s motion for a temporary restraining order and preliminary injunction against New Jersey’s gaming regulators, preventing them from issuing cease-and-desist orders to Kalshi.
The decision effectively granted Kalshi the authority to continue to offer prediction contracts, including those involving sports events, without regulation or interference at the state level.
Kalshi previously argued that its subordinate status to the Commodities Federal Trading Commission makes it a federally regulated body, and it should not be held liable to state regulations.
The attorneys general, who are also co-led by Nevada’s Aaron Ford, have claimed that the federal laws were not written with the intent to strip states of their power to regulate local gaming markets.
Illegal sports betting?
The amicus brief filed this week warned that allowing Kalshi and other prediction platforms to circumvent regulation would authorize unlicensed and unprotected sports betting.
“Eliminating the states’ ability to regulate online sports betting would pose very serious risks to the states’ citizens. Online sports betting, while convenient and entertaining for many, comes with life-altering consequences for some.”
Front Office Sports reported on Tuesday that Kalshi, Robinhood, and others were named in lawsuits filed in five states that claimed their sports prediction markets were a cloak for illegal sports betting.
Many states found success using cease-and-desist orders to stop illegal offshore sportsbooks and unlicensed online casinos from offering gambling services in their jurisdictions. This case is different in that prediction platforms have complied with all federal regulations, and the court ruled that New Jersey could not block Kalshi’s operations.
“The balancing of the factors here cautions me to keep the toothpaste in the tube,” U.S. District Judge Edward S. Keil wrote in his opinion that sided with Kalshi over New Jersey.