Despite ongoing controversy involving prediction platforms, Kalshi launched individual MLB game contracts and markets Wednesday.
Several states already sent cease-and-desist letters to platforms such as Kalshi that offer sports prediction contracts, arguing they are simply outlets for unlicensed sports betting.
Key insights
- Kalshi has now launched MLB and NBA markets this week.
- Sports contracts mimic traditional sports betting but are not subject to state regulation.
- Prediction platforms are preparing to sue state regulators who sent them cease-and-desist letters.
The launch of MLB markets comes three days after Kalshi posted NBA contracts.
The MLB markets contain what would be considered “futures bets” at legal sportsbooks, such as which team will win the World Series, the American League West division winner, and more. They also have individual matchups, like if the San Francisco Giants will beat the Philadelphia Phillies on Thursday.
Instead of selecting betting odds, users purchase contracts that settle depending on the outcome of the market they chose.
Many state regulators believe that this distinction is not enough to exempt Kalshi and other trading platforms from circumventing typical sports betting rules related to licensing and regulation.
The Commodity Futures Trading Commission (CFTC) said in a Feb. 5 announcement it will hold a public roundtable on prediction markets and sports event contracts. That roundtable is expected to be held on April 30 with the goal of examining the history of prediction markets to set the commission’s stance on sports contracts.
“Unfortunately, the undue delay and anti-innovation policies of the past several years have severely restricted the CFTC’s ability to pivot to common-sense regulation of prediction markets,” said acting chairman Caroline D. Pham.
“Prediction markets are an important new frontier in harnessing the power of markets to assess sentiment to determine probabilities that can bring truth to the Information Age. The CFTC must break with its past hostility to innovation and take a forward-looking approach to the possibilities of the future.”
Checking the pulse at the state-level
The CFTC noted that it identified several issues related to regulating sports contracts. That included that “gaming involves games” and “sporting events constitute ‘gaming’ and are therefore prohibited under the Commodity Exchange Act.”
Kalshi’s willingness to progress with sports contracts despite controversy shows its confidence in escaping punishment.
Trading platforms have also been on the offensive recently. The Ohio Casino Control Commission was told it should prepare for a lawsuit after it sent cease-and-desist letters to Kalshi, Robinhood, and crypto.com, all of which the regulator said needed licensing to sell sports contracts.
On April 8, a Nevada judge also granted Kalshi’s request for a temporary restraining order and preliminary injunction against local gaming regulators who attempted to shut down sports contracts.
Regulators in Illinois, Maryland, Montana, and New Jersey have already sent cease-and-desist letters to several platforms.
Tennessee regulators also asked the CFTC to ban sports contracts in a letter sent earlier this week.
