Ohio is latest state to issue cease-and-desist to Kalshi in battle over prediction markets

The legislative war against Kalshi continued Monday when Ohio became the latest state to deliver the predictive-markets platform a cease and desist for its sports offerings.

The Ohio Casino Control Commission directed Kalshi, along with Robinhood and Crypto.com, to stop offering sports futures market trading in the state due to its likeness to sports betting.

Ohio followed the states initially taken by New Jersey and Nevada to ban sports-related market prediction trading on the sites, which were recently rolled out by Kalshi and Robinhood* just in time for the NCAA men’s basketball tournament, and are available to anyone 18 and older.

*NOTE: Robinhood pulled down its March Madness prediction markets after New Jersey sent its cease-and-desist letter last week

“Purchasing a contract based on which team a person thinks will win a sporting event is no different than placing a bet through a traditional sportsbook,” said Matthew Schuler, the OCCC executive director. “The only difference is these event contracts do not have the consumer protections required under Ohio law and are accessible to Ohioans under 21 years of age.

“The commission must take action to fulfill its statutory responsibilities and ensure the integrity of sports gaming in Ohio.”

Under the cease and desist, Kalshi, Robinhood and Crypto.com have 14 days to prove to the OCCC that they have stopped accepting trades in The Buckeye State.

The OCCC sent the cease-and-desist letter on Monday. On Wednesday, Kalshi will be in court, along with the New Jersey Division of Gaming Enforcement, to determine if it will receive a ‘temporary restraining order and preliminary injunction."

What that means is Kalshi is asking for more time to build its case, rather than having to shut down its operations immediately.

What is predictions-market trading?

Kalshi, whose predictions rose to prominence when it offered betting-style predictions on the 2024 U.S. Presidential Election, has been offering celebrity, weather and other culturally timely predictions markets since 2021.

The company is different from a sportsbook in that it’s not “the house.” Kalshi takes a piece of “contracts” traded between users on its platform - rather than collecting its take from lost wagers - making it a peer-to-peer system.

Kalshi and Crypto.com successfully accepted sports-related markets for the Super Bowl, but not completely without controversy. Robinhood, who had partnered with Kalshi to create Super Bowl markets, suspended its big-game offerings after receiving a request from the U.S. Commodities Futures Trading Commission.

States over Feds

The CFTC regulates predictive markets, but that has not stopped states from scrutinizing the companies -- especially after they announced predictive offerings for both the men’s and women’s NCAA Tournaments in all 50 states and Washington, D.C.

That’s the crux of the issue here: Who should regulate predictions markets - CFTC (the federal government) or state governments, when they blur the lines of what constitutes ‘sports betting?’

Massachusetts secretary of state Bill Galvin subpoenaed Robinhood last week for its March Madness-themed markets. He called the practice “another gimmick from a company that’s very good at gimmicks to lure investors away from sound investing.”

Massachusetts, Ohio, Nevada and New Jersey are among the two-dozen-plus states to offer legal, regulated sports betting within its state borders. Part of their public dissent of predictions markets is their lack of fail-safes for responsible gaming and age enforcement.

Meanwhile, there was a plan for a CFTC roundtable announced in February, the aim of which was to address this issue, but there’s been no news or update on when that will take place. The press release said it would take place “approximately 45 days at the conclusion of its requests for information on certain sports-related even contracts.”

But state lawmakers in New Jersey, Nevada and now Ohio aren’t waiting any longer, and are instead bringing the issue to the forefront.

Kalshi CEO Tarek Mansour has been on the offensive to protect potential users by launching the Consumer Protection Hub. He also sued Nevada and New Jersey to keep operating there, and a similar lawsuit to block the Ohio ruling seems likely.

“We need prediction markets now more than ever,” Mansour posted on X, formerly Twitter, on March 30. “Both states have issued cease and desist orders that fundamentally misunderstand prediction markets and undermine the foundation of U.S. financial markets, which are regulated by the federal government.

“We have made every effort to engage proactively with both Nevada and New Jersey and try to educate them about prediction markets, how they are regulated, and how critical they are. … but our words fell on deaf ears. I can’t speak to why they are taking this action, but prediction markets have proven their use, so it is a shame that these authorities are still trying to censor them.”