Event contract platform Kalshi has intensified its battle with U.S. state regulators, filing a lawsuit this week against the Ohio Casino Control Commission (OCCC) and the Ohio Attorney General’s Office.
The case, lodged in the U.S. District Court for the Southern District of Ohio, follows a cease-and-desist order issued against Kalshi in the spring and a subsequent warning in August to sportsbooks advising them not to offer event contract products.
In June, Ohio Attorney General Dave Yost was among 34 state attorneys general supporting New Jersey’s efforts to tighten oversight on prediction markets — a growing point of tension between state gambling agencies and federally regulated platforms.
Kalshi’s latest lawsuit seeks a preliminary injunction to prevent Ohio from enforcing its gaming laws, arguing that it operates under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state regulators.
“Ohio’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges,” the complaint states. “The state’s efforts to regulate Kalshi are both field-preempted and conflict preempted.”
The company is asking the court for both preliminary and permanent injunctions, as well as declaratory relief.
Industry Divided Over Prediction Markets
At the Global Gaming Expo (G2E) in Las Vegas this week, industry experts and regulators tackled the rise of prediction markets in a panel titled, “Unpredictable: How the Emergence of Event Contracts Challenges the Paradigm of Regulated Gaming.”
Kevin King, a partner at Covington & Burling LLP, described the situation as a battle of “preemption, procedure, and patience.” He explained that the key issue revolves around whether federal futures law preempts state and tribal authority over sports event contracts.
Prediction market operators argue that federal oversight through the CFTC gives them the right to operate nationwide. In contrast, multiple states — along with the American Gaming Association (AGA) — insist that such markets constitute illegal sports betting.
King noted that these disputes are in the early stages, saying the ongoing litigation is probably still “the first quarter.”
Kalshi has already won temporary injunctions in New Jersey and Nevada, while a Maryland judge denied its request for one. Nevada also denied an injunction for Crypto.com, another platform entering the event contract space.
States Push Back With Regulatory Pressure
Industry consultant Dustin Gouker, owner of Closing Line Consulting, told G2E attendees that it may take “two or three years” before courts determine whether sports event contracts amount to legal betting.
Gouker said that while regulators are reacting, they may need to act more proactively. He pointed to a letter from Kevin O’Toole, executive director of the Pennsylvania Gaming Control Board (PGCB), which warned lawmakers that prediction markets are creating “a backdoor to legalized sports betting.”
“Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law,” O’Toole wrote.
Beyond Ohio, regulators in Michigan, Arizona, and Massachusetts have taken similar action, warning operators like FanDuel and Underdog against launching event contract products.
Arizona Department of Gaming Director Jackie Johnson said during the G2E panel that prediction markets are “ignoring state policy.”
“We’re looking at consumer protection, protecting the integrity of our current market, and you can’t just sit on the sidelines and allow it,” Johnson added.
Federal Lawmakers Join the Debate
The controversy has also drawn attention from Capitol Hill.
U.S. Senators Catherine Cortez Masto of Nevada and John Curtis of Utah recently urged the CFTC to enforce state gambling laws more strictly, warning that prediction markets “illegally circumvent” state authority.
Cortez Masto told The New York Times: “We have laws on the books right now that the CFTC needs to enforce.”
The Biden administration’s CFTC commissioners previously sought to ban election and sports event contracts, but a federal court overturned an order blocking Kalshi’s election-related products last October. The platform went on to record $700 million in trades during the 2024 presidential election.
Leadership changes at the CFTC have added uncertainty. Four commissioners have resigned since 2017, leaving Caroline Pham as acting chairwoman.
Kalshi also made headlines earlier this year by naming Donald Trump Jr. as a strategic adviser, launching new sports event markets shortly after.
Former CFTC commissioner Kristin Johnson recently warned that the rapid expansion of prediction markets poses risks if “too few guardrails” are in place.