Prediction market Kalshi is facing a new lawsuit, even as state regulators continue their crackdown on prediction markets over claims that they run unlicensed sports betting platforms. Experts have suggested that the legal battle between these platforms and state regulators could get to the Supreme Court, with a recent ruling showing that the regulators may have an advantage.
Prediction Market Kalshi Faces Federal Class Action Lawsuit In Oregon
In an X post, sports gaming lawyer Daniel Wallach revealed that Kalshi is facing a federal class action lawsuit in Oregon for operating an “illegal online gambling enterprise” in violation of Oregon law, which bans all non-state-run gambling-related activities within its borders. The plaintiffs are seeking twice the damages under the state’s loss recovery statute.
This lawsuit comes amid states’ regulatory crackdown on prediction markets, with these regulators claiming that platforms like Kalshi and Polymarket are violating their sports betting laws by running unlicensed gaming platforms. As CoinGape reported, the CFTC recently filed an amicus brief to defend its jurisdiction over these platforms, arguing that state regulators have no jurisdiction over Kalshi and Polymarket.
Wallach noted that Kalshi is now facing up to 20 cases, including litigation cases involving state regulators. These states include Nevada, New Jersey, Maryland, Massachusetts, Ohio, New York, Connecticut, and Tennessee.
CoinGape reported earlier this week that Nevada has filed an action to block Kalshi from offering sports event-based contracts in the state. The prediction market has moved to transfer the case to a federal court, arguing that the case raised a matter regarding the CFTC’s jurisdiction. However, Nevada filed an emergency motion to remand the case to the state court.
Wallach revealed that the court will hear Nevada’s motion to remand the civil enforcement actions against Kalshi and Polymarket collectively since the remand action in both cases “raises some overlapping issues.” The hearing will take place next Tuesday.
Supreme Court Ruling On Trump Tariffs May Give State Regulators An Edge
In another X post, Wallach stated that the Supreme Court’s ruling on the Trump tariffs is a boon for the states’ argument against sports prediction markets. He noted that the ruling reinforces the need for clear congressional authorization for agency actions of major economic and political significance.
The legal expert questioned whether this would apply to the Commodity Exchange Act, which gives the CFTC jurisdiction over Kalshi and Polymarket, which operate as derivatives exchanges. He followed this up with a question about whether there was clear congressional authorization in 2010 to empower the Commission to regulate sports wagering nationwide, when other federal laws gave states authority to determine what forms of gambling could take place within their borders.
Wallach stated that the answer would appear to be no, meaning that CFTC’s jurisdiction unlikely extends to these sports-based event contracts, which may be classified as gambling. Bloomberg analyst James Seyffart opined that the compromise is that prediction markets should obtain a gaming license for their sports-related markets. Meanwhile, litigation analyst Elliott Stein noted that the case between Kalshi is likely to reach the Supreme Court on an emergency basis.
