Criticism Met by Kalshi Regarding their Use of Gambling Lingo
In a unique twist, Kalshi's peer-to-peer trading exchange, which offers event contracts on the outcomes of real-world events including sports, is currently considered legal under federal law. This is due to its registration and regulation by the Commodity Futures Trading Commission (CFTC), despite its betting-related language and absence of a traditional state gambling license.
Kalshi operates as a designated contract market registered with the CFTC, a body that governs derivatives markets at the federal level. The Commodity Exchange Act (CEA) grants the CFTC exclusive jurisdiction over commodity futures and event contracts, preempting conflicting state laws such as New Jersey’s Sports Wagering Act.
States like New Jersey have issued cease-and-desist orders claiming Kalshi’s event contracts are unauthorized gambling. However, Kalshi has contested these actions by arguing the CFTC’s regulatory framework supersedes state gambling regulations, a claim that has so far been supported by courts through preliminary injunctions against state enforcement.
Despite this federal court ruling, the decision is on appeal, and other legal challenges include lawsuits from California tribes alleging that Kalshi’s sports event contracts violate the Indian Gaming Regulatory Act (IGRA) and tribal gaming compacts. These lawsuits assert that the contracts are illegal wagers on tribal lands.
The nature of Kalshi’s contracts is a fundamental aspect of its argument. Although they resemble bets on event outcomes, they are legally structured as federally regulated commodity futures. This distinction is crucial to Kalshi’s claim that it is not conducting gambling under state law but rather operating a lawful derivatives market.
The legality of Kalshi’s operations remains contested in ongoing state and tribal lawsuits. The attorneys general have filed an amicus brief in support of New Jersey in a lawsuit over Kalshi's mobile offering. Ohio AG Dave Yost, who leads a coalition of 36 state attorneys general, warns that Kalshi sidesteps local authority over gambling policy and creates a backdoor that weakens state oversight.
Yost argues that the states' role in regulating gambling exists to protect consumers from financial harm or addiction. The coalition of attorneys general continues to push back, arguing that the platform creates the same risks as traditional online betting.
Recently, Kalshi scored a legal win in federal court in New Jersey in April 2025. The case is still unfolding, with definitive outcomes depending on appellate rulings and further regulatory developments.
- Kalshi, despite operating without a traditional state gambling license, situates itself as a designated contract market registered with the CFTC, leveraging the Commodity Exchange Act (CEA) to argue that its event contracts, though similar to bets, are legally structured as federally regulated commodity futures, thus not subject to state gambling regulations.
- In a contrast to state arguments that Kalshi's event contracts amount to unauthorized gambling, Ohio AG Dave Yost, leading a coalition of 36 state attorneys general, claims that Kalshi's operations bypass local gambling authorities, potentially creating a loophole that could undermine state oversight, hence jeopardizing consumer protection from financial harm or addiction associated with casino-and-gambling activities.