Kalshi's Betting Semantics Spark Ongoing Regulatory Dispute
Kalshi has asserted that it operates outside the boundaries of gambling regulation, continuing to provoke legal and rhetorical challenges. The latest claim states that the use of the word "bet" in its marketing material doesn't mean it offers betting.
At a recent gaming conference hosted by the National Council of Legislators from Gaming States, Milbank attorney Josh Sterling, who represents Kalshi in ongoing litigation, claimed that prediction markets differ from the traditional best sports betting sites because "there are no odds being set." This comment triggered renewed scrutiny of how Kalshi presents its platform, particularly given its prominent use of betting language in advertisements and user interfaces.
Kalshi allows the speculation of the outcome of sports contests, among other events, in all 50 states without holding any betting license. It insists that its platform operates on a peer-to-peer trading model, not a betting model, and that the Commodity Futures Trading Commission (CFTC) oversees it.
However, critics point out that Kalshi prominently displays contract prices in "American odds" format and uses betting language in its marketing. A January social media post even stated, "Hello sports lovers, American Odds are live on web," while one now-removed Google ad urged users to "Bet on NBA legally!"
Kalshi also markets products whose logo reads "What are the odds," yet again blurring speculative markets with gambling. Sterling has stated that his statement was purely in terms of the peer-to-peer model of Kalshi, not the corporate marketing materials.
He explained that the website does not offer odds independently, but shows the market buy/sell sentiment. Kalshi has reiterated that using the terms "odds" or "bet" does not classify the service as gambling under current law.
Federal case could redefine betting
A legal showdown involving Kalshi now before the U.S. Court of Appeals for the Third Circuit could become a watershed moment in the regulation of sports betting in the U.S. The case centers on Kalshi's attempt to preempt New Jersey's enforcement of a cease-and-desist letter related to its sports event prediction contracts.
Although the company has litigated several lawsuits, that is the first lawsuit that has survived the full appeals process, even drawing broader attention through several amicus briefs.
Thirty-four of the states' attorneys general, the District of Columbia, the Northern Mariana Islands, and other advocacy groups, including the American Gaming Association (AGA), filed opposition briefs.
They argue that approval of the CFTC exercise of authority over event-centered sports contracts jeopardizes the pre-2018 Supreme Court ruling in the preemption of the field that happened upon the undoing of PASPA.
Opponents maintain that Kalshi's structure attempts to obscure gambling classification through semantics. The AGA contends that such a model could create a parallel system that evades essential consumer protections and destabilizes the legal sports betting paradigm painstakingly constructed since PASPA's repeal.
