Despite operating under federal oversight, Kalshi may have some obstacles on the federal level. Several legislators submitted a draft letter to the Commodity Futures Trading Commission outlining their concerns over the company’s sports prediction markets.
According to InGame, the letter is circulating on Capitol Hill. It questions whether Kalshi’s offerings are simply an end-run around state sports betting laws.
“The CFTC must not override state and tribal law allowing sports betting in all 50 states by permitting some companies to categorize their sports betting activities as ‘event contracts,'” legislators wrote.
Lawmakers Question CFTC’s Effectiveness
The letter appears to be a bipartisan effort with Sen. Catherin Cortez Masto, D-NV, and Sen. John Curtis, R-UT, serving as two of the document’s signatories. In the letter, legislators outline 11 question for the commission.
The questions range from why the CFTC isn’t regulating the industry’s sports prediction markets to how the CFTC advises contract market firms seeking authority on how they comply with state laws. That includes states that haven’t legalized online sports betting.
“Some companies are claiming to allow legal sports betting in all fifty states,” lawmakers wrote. “This action – and the CFTC’s unwillingness to stop it – contradicts both the letter and the intent of the law. The Commission cannot sidestep its statutory obligations by declining to enforce prohibitions that Congress enacted. Doing so undermines the sovereign authority of states and tribes to regulate gambling within their jurisdictions and risks federalizing an area of law that the Supreme Court has held is reserved to the states.”
The letter also raises questions about compliance with betting age requirements and other issues that legal sportsbooks must deal with.
“If the CFTC believes that all sports event contracts listed are outside the scop of prohibitions in the Commodity Exchange Act, how is the CFTC advising sportsbook and other contract market firms seeking this authority on how they must comply with state and tribal laws requiring age limits and access controls?” legislators wrote in the letter.
Letter Is Latest In Series Of Hurdles
According to the letter, lawmakers believe that federal oversight might be at odds with state gaming laws. Those concerns have played out recently in court. A federal judge ruled that Kalshi violated Maryland’s gaming laws and must obtain a license to continue operations.
Kalshi appealed the ruling, but the company previously won similar decisions against New Jersey and Nevada. In an agreement with Maryland, the company can continue its operations until the courts make a final decision.
Massachusetts also recently filed suit against the company, and other states have sent the company cease-and-desist letters for sports prediction markets. Several tribes also sued the company.
Kalshi offers prediction markets for several industries, including politics, pop culture, and even cryptocurrency. However, sports prediction markets are 80% of Kalshi’s total trades.
Despite its hurdles, Kalshi continues to move forward with its marketing plans. The company signed a partnership with Daniel Negreanu and separate agreement with the NFL on FOX.
