A Las Vegas man who has traded in prediction markets for years will pay close attention to a court hearing in Carson City on Friday to see if he has to work out a settlement if Kalshi is banned from operating in the state.
The Nevada Gaming Control Board is seeking an injunction against Kalshi, who the state says is illegally offering sports betting through its prediction market platform. Carson City District Court Judge Jason Woodbury on March 20 issued a temporary restraining order against New York-based Kalshi and set the injunction hearing for Friday.
Kalshi traders, including cryptocurrency startup operator Richard Lee, are awaiting the outcome of the hearing to determine how they will be able to continue trading if the plug is pulled on the prediction market, which has been operating since it was founded in 2018 but rose to prominence last year when it began offering markets on the outcome of sporting events.
Gambling regulators in Nevada identified Kalshi’s operation as a form of sports betting and took steps to shut it down. But Kalshi has fought back, challenging every move regulators have made. The Board of Control’s recent strategy was to take their legal challenges to state court instead of federal court where they found judges more attuned to state gaming laws.
Kalshi has tried to take the fight to US District Court, but lost an appeal in the 9th Circuit Court of Appeals, which ordered the case to Carson City District Court.
Lee, who enjoys betting on NFL football and has placed bets in sportsbooks on NFL games, prefers how Kalshi acts.
“I think the prediction market ecosystem is much healthier,” Lee said in a phone interview. “Sportsbooks only want the losers, right? They basically find a way to ban the winners, and then they’re the house. With Kalshi, it’s a much fairer ecosystem where they only charge a transaction fee for each trade.”
Lee said he got good enough at sports betting with sportsbooks that they started limiting his bets. He switched to Kalshi and has been trading there ever since, generating six-figure earnings, he said.
He studied economics in college and said he is comfortable with federal regulation of the market. He sees companies like Kalshi as a market disruptor, in the same way that Uber took stakes from taxi companies in the late 2000s.
“It was obviously a strategic decision to be federally regulated to allow ourselves to enter markets in all 50 states,” Lee said.
It’s unclear what Kalshi will do if it loses in court Friday because other states, including Massachusetts, have adopted Nevada’s approach and refiled their cases in state courts.
Some analysts have said they expect Kalshi to appeal its cases to the US Supreme Court if it continues to lose.
Lee understands that states are unhappy with prediction markets because they pay no state gambling taxes on the revenue they generate like traditional sports books.
The American Gaming Association and other gaming industry advocates also say there are fewer protections against underage gambling and fewer programs to address problem gambling in prediction markets.
Kalshi and other prediction market platforms say the fact that they are regulated by the federal Commodity Futures Trading Commission allows them to operate in all 50 states and are not subject to state gambling laws.
–
