This week marked a significant advancement for Kalshi, a notable entity in the prediction markets field, as they clinched a legal victory in California and unveiled a major collaboration with PrizePicks, enhancing their market presence.
These developments underscore the intricate legal landscape and swift expansion of event-trading markets nationwide.
The Northern District of California’s U.S. District Court dismissed an action initiated by three tribal groups that sought to obstruct Kalshi’s operations within their jurisdiction in California. The tribes argued that Kalshi’s business infringed on the Indian Gaming Regulatory Act, claiming exclusive rights to Class III gaming in the state.
The court found that Kalshi, regulated by the Commodity Futures Trading Commission (CFTC), adheres to the Unlawful Internet Gambling Enforcement Act. It concluded that Kalshi’s internet-based contracts do not qualify as “unlawful internet gambling,” despite being prohibited in tribal areas where such gambling activities are forbidden.
Although acknowledging the implications of Kalshi’s operation on tribal sovereignty and economic interests, the court recognized that Kalshi’s self-certification might circumvent certain state gambling laws meant to protect tribal rights. However, it concluded that the tribal plaintiffs had not demonstrated a likelihood of prevailing on their claims under the Indian Gaming Regulatory Act.
Challenges for prediction markets across the US
Beyond California, other states such as New Jersey, Nevada, and Maryland, along with the Ho-Chunk Nation in Wisconsin, have also challenged Kalshi’s operations, yielding diverse judicial decisions. While some courts have issued temporary injunctions supporting Kalshi, others are under appeal.
Furthermore, the involvement of 34 state attorneys general in supporting a lawsuit against Kalshi in New Jersey highlights the heightened scrutiny faced by the industry.
Competitors like Robinhood and Crypto.com encounter comparable legal challenges, with Crypto.com exiting Nevada following legal obstacles, and Robinhood suffering adverse decisions in Massachusetts.
PrizePicks debuts event trading platform
With its recent acquisition by Allwyn at $1.6 billion, PrizePicks launched its prediction market features in 38 states via its partnership with Kalshi. These services are facilitated through PrizePicks’ subsidiary, Performance Predictions II, which is a federally authorized Futures Commission Merchant.
According to Mike Ybarra, PrizePicks CEO, this new initiative caters to the increasing consumer appetite for diverse and creative gaming options. Despite disruptions from the governmental shutdown, the partnership with Polymarket is poised to expand the available market offerings further.
PrizePicks now allows users to engage in trading activities across various sectors including sports, entertainment, and pop culture, capitalizing on Kalshi’s extensive market options.
Other daily fantasy sports platforms like Underdog are exploring prediction markets with the recent introduction of sports betting products, despite legal issues in some states.
The court’s backing of Kalshi under the Indian Gaming Regulatory Act plays a crucial role in the broader national debate about how prediction markets fit within the gambling sector.