States, Tribes, and Industry Groups Join NJ in Legal Dispute Against Kalshi

Groups filing amicus briefs against prediction markets giant Kalshi continue to grow in number as 34 state attorneys general, several tribes, the American Gaming Association (AGA), and more side with the state of New Jersey.

New Actors Join New Jersey in Legal Dispute Against Kalshi

The legal dispute started when Kalshi filed a lawsuit in district court, aiming to block New Jersey, one of the defendants, from enforcing a cease-and-desist letter directed at its sports-related event contracts. While Kalshi has pursued several lawsuits against states and their gaming regulators, this is the first case to advance to the appellate stage, drawing a wave of amicus briefs due to its wider legal significance.

The American Gaming Association (AGA), along with a coalition of 34 state attorneys general, joined by representatives from the District of Columbia, the Northern Mariana Islands, and several tribal organizations, has also filed briefs opposing Kalshi’s legal position. Additional amicus briefs have been submitted by groups such as the New Finance Institute, Stop Predatory Gambling, Texans Against Gambling, the Association of American Physicians and Surgeons, and the Casino Association of New Jersey.

With the growing number of actors filing amicus briefs against the prediction markets giant, it’s unknown if this would negatively affect FanDuel’s rumored upcoming partnership with Kalshi.

What Do States Argue?

The briefs emphasize the potential ramifications of permitting the Commodity Futures Trading Commission (CFTC) to regulate sports wagering via event contracts, which is a framework Kalshi argues is separate from conventional gambling. AGA contends that the CFTC lacks the specialized knowledge, infrastructure, and enforcement capabilities needed to manage the complexities of sports betting markets. The association maintains that proper oversight of these markets demands substantial regulatory experience and resources – features held by state regulators, but not by the CFTC.

The states involved argued that Kalshi’s interpretation of federal law would substantially undermine their traditional authority to regulate gambling. In their amicus brief, they assert that Kalshi’s contracts are essentially sports bets, disguised as commodity trades in an effort to sidestep state gambling regulations. States further argue that Kalshi’s interpretation of the Commodity Exchange Act (CEA), which it claims grants the CFTC exclusive regulatory control, would effectively deprive states of their ability to oversee and enforce laws within the sports betting industry.

What Do Tribal Representatives Argue?

In their joint brief, tribal organizations argued that Kalshi’s contracts violate the Indian Gaming Regulatory Act (IGRA) and the terms of existing tribal-state compacts. They contended that Kalshi’s portrayal of sports betting as a form of commodity trading is a deliberate misrepresentation intended to circumvent both federal gaming laws and tribal regulatory authority.

Further, according to the brief, even under the CEA, Kalshi’s sports-related event contracts are either expressly prohibited or fall outside the bounds of lawful commodity derivatives. Tribal leaders warned that allowing Kalshi to operate under this framework would undermine the economic stability of tribal communities and weaken the regulatory systems established by federal law.

The debate over whether predictions markets, and subsequently companies like Kalshi, infringe upon sectors traditionally occupied by tribal casinos is nothing new. In fact, just a few weeks ago, the CFTC held talks with tribal groups discussing this very same topic, with more dialogues still being planned. 

Despite everything, Kalshi CEO Tarek Mansour remains firm, saying in a social media post from March, he claimed that authorities were attempting to “censor” the industry. Kalshi is still preparing its legal arguments and, after requesting additional time, was granted an extension by the court on June 16, giving the company until July 24 to file its presentation.