Kalshi Fires Back At Ohio Sports Betting Regulators

Kalshi will not be leaving the Ohio sports betting market without a fight.

Of course, if you ask the company, they do not actually provide sports betting in Ohio. They traffic in event-based contracts. They believe these transactions are effectively trades. And that would put them under federal jurisdiction rather than state regulation.

In a nutshell, this is why Kalshi has decided to sue the Ohio Casino Control Commission (OCCC). The company, which bills itself as a “Prediction Market for Trading the Future,” filed the lawsuit after Ohio sports betting regulators insisted they cease operating in The Buckeye State. They are requesting an injunction that precludes the OCCC from forcing it to shudder operations.

Ohio Sports Betting Regulators are Not Swayed by Kalshi’s Arguments Against Their Lawsuit

A few weeks ago, according to Legal Sports Report’s Matthew Waters, Kalshi and Ohio sports betting regulators participated in a joint phone call. From the sounds of it, their dialogue did not come close to yielding any resolution. As Waters writes:

“A representative for the OCCC told Kalshi it would respond in writing but that it was ‘unlikely to further extend the deadline’ of the cease-and-desist. The regulator then informed Kalshi on Monday that it was “unpersuaded” that Kalshi’s sports predictions were ‘preempted by federal law as Kalshi contends’ and asked for confirmation of the end of its services in the state by Oct. 20. Consequently, to the extent Kalshi chooses to continue to offer unlicensed and unregulated sports gaming in the form of sporting event contracts within Ohio, Kalshi will be violating Ohio law,’ the OCCC said.”

This gets to the heart of the issue for Kalshi and other prediction-market operators. Exceptions are not just being taken by Ohio, either. Many states believe that event-outcome contracts illegally skirt laws for sports betting in the United States.

Litigation is pending in a handful of regions, including New Jersey and Nevada. Massachusetts sports betting regulators have also taken aim at prediction markets. The same goes for Arizona sports betting regulators.

With so many legislators opposed to these prediction markets, it stands to reason they could fall by the wayside, much like previous iterations of daily fantasy sports. However, it seems like a real possibility that Kalshi will be granted its injunction. Courts in Nevada and New Jersey have ruled that they can continue operations while lawsuits are still pending.

The Ohio Casino Control Commission is Also Dissuading Partnerships Between Kalshi and Sportsbook

Part of Kalshi’s lawsuit spotlights the steps taken by the OCCC to deter licensed Ohio sportsbooks from striking partnerships with them. Indeed, Ohio sports betting regulators actually sent a letter to approved mobile sites this past August stating as much.

Kalshi, of course, is not happy about it. As Waters reports:

“‘The Casino Commission’s message to its gaming licensees has been clear: If you or your affiliates do business with Kalshi anywhere in the country, we will retaliate,’ the complaint reads. Kalshi said the ‘threat’ to licensees subjects it to ‘extraordinary harm.’ ‘Several’ operators with Ohio gaming licenses have contacted Kalshi about predictions, but are reluctant to move forward and are reconsidering signed term sheets, according to the complaint. ‘These prospective partners expressed reluctance to put their Ohio license at risk by challenging the Casino Commission,’ the complaint says. ‘… Some of these prospective business partners have millions of active users. The loss of these users, should the business partners acquiesce to the Casino Commission’s unlawful threat, would present a massive disruption for Kalshi financially and reputationally.’”

Sportsbooks jumping into the predictions market admittedly feels like a “If you can’t beat them, team up with them” situation. In theory, licensed mobile sports betting apps in the United States should be just as against prediction markets as state legislators.

Companies like Kalshi represent an additional layer of competition. Despite attempts to distinguish Ohio sports betting from Ohio prediction markets, they ultimately serve the same endgame. One of them, though, does not require a license—by their interpretation of the law anyway.

Yet, while this should rankle sportsbooks in the USA, some have taken to striking partnerships with prediction-marker operators. Others have also started offering event-based contracts themselves, predominantly in markets that don’t yet have legal sports betting.

A New Sports Betting Precedent is About to be Set

One way or another, the battle over event-based contracts and whether they constitute sports betting is going to change the industry forever.

Moving forward, if one state loses its battle to force prediction markets out of the region, it sets the stage for actions taken by other states to fold. In turn, this would let prediction-market operators function at an even larger scale. Essentially, it would render them a permanent alternative—and thus competitor—to sports betting.

On the flip side, if courts decide prediction markets are tantamount to sports betting, an entire industry implodes. We have seen it happy before with daily fantasy sports sites. So many operators needed to shift their entire business model. Some of them pivoted to—you guessed it—the prediction markets that are under scrutiny now.

Many believe these event-based contracts will reach a breaking point, just like DFS. It is a much tougher call in our estimation. The argument that prediction markets should be monitored by the Federal Trade Commission is persuasive if you consider these transactions actual trades.

With that said, attempts at the distinction are where things fall apart for us. Prediction markets sound like sports betting rebranded. And unless the federal government plans to seek oversight in the sports betting industry at large, it’s tough to imagine prediction markets surviving in their current form.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: