Kalshi Sparks Sports Betting Controversy, Operating in All 50 States Despite Challenges

Kalshi, a prediction market platform, has sparked controversy by offering sports betting markets across all 50 states, despite cease-and-desist letters from seven states. Critics, including Sen. Catherine Cortez Masto, argue that Kalshi is dodging regulations and taxes by labeling its activities as 'prediction markets' rather than stock market betting.

The platform's growth has been significant, with over $2.5 billion in sports contracts traded in September alone. However, its operations have not gone unchallenged. Under the Biden administration, the Commodity Futures Trading Commission (CFTC) attempted to halt prediction markets from accepting election and stock market wagers, but a federal court overruled the agency. The CFTC, staffed with a majority of Democratic commissioners, had aimed to prevent such markets from operating.

Kalshi differentiates itself from traditional sports gambling apps like FanDuel or DraftKings. It operates as a financial market, regulated by the CFTC, allowing it to function in states where online sportsbooks are prohibited. Ian White, a user from Minnesota where online sports betting is illegal, has used Kalshi to trade on NFL game outcomes, making about $130 by buying contracts worth $10 a game. Kalshi's entry into stock market betting coincides with rising skepticism towards legal gambling, with 43% of American adults viewing it negatively. In January, Kalshi named Donald Trump Jr. as a strategic adviser and listed its first sports contracts on NFL playoff games.

Kalshi's unique approach to stock market betting, operating as a prediction market, has raised questions about its regulatory status and impact on the industry. As it continues to expand, offering markets in all 50 states despite legal challenges, the platform's future and the broader implications for stock market betting regulations remain uncertain.