DUBLIN, Oct 21 (Reuters) – A legal clash between prediction markets and US states over who should regulate the industry could eventually end up at the Supreme Court, Tarek Mansour, the co-founder of Kalshi, told Reuters.
“I think the process will play out the way it’s going to play out,” Mansour, who is chief executive of the platform, said on the Reuters Econ World podcast.
Dozens of states have taken legal action over sports-related trades on Kalshi, a prediction markets platform that offers users yes-or-no bets on everything from which political party will control Congress after next month’s midterms to who will win the current season of “Dancing with the Stars.”
The states say prediction markets like Kalshi are subject to state gambling laws and gambling taxes. Kalshi argues that its wagers aren’t gambling and should be exempt from state supervision. The company says sports contracts traded on its platform are a type of financial derivative and are subject to federal regulation under the Commodity Futures Trading Commission (CFTC).
Federal appeals courts have so far split, with Kalshi on the losing end of some recent cases. But the platform secured a big appeals court victory in the action brought against it by New Jersey, which has asked for a Supreme Court review.
Mansour declined to comment on Kalshi’s odds of winning if the Supreme Court agrees to take up the case, but said the company was very confident in its legal position.
“Frankly, the statute and the structure is very, very clear and, you know, whether people think a sports game is a game, this commodities exchange act gave the CFTC the authority to decide what to do with the game, and to regulate it the way it sees fit, and that’s what it’s doing.”
At stake is the future of a booming industry. The prediction market has surged in recent years with an explosion in sports betting, helping drive Kalshi’s valuation to around $40 billion in a new funding round, according to people familiar with the matter.
Mansour said sports currently accounts for close to 65% of its revenue, compared to around 95% nine months ago.
A Supreme Court victory for Kalshi could cement its position as a leader in prediction markets and boost its push to become a one-stop trading platform for a wide array of asset classes competing with traditional exchange heavyweights, like CME Group and Intercontinental Exchange, the parent of the New York Stock Exchange. A defeat would leave the company vulnerable to states that want to maintain tight control over gaming and could crimp its profits from sports wagers.
(Reporting by Carmel Crimmins; Editing by Daniel Wallis)
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