Washington state has become the latest to sue a prediction markets provider, after alleging Friday that Kalshi violated state gambling laws with its products.
According to the complaint, Washington has a strictly regulated gambling market, including a ban on online gambling, but Kalshi’s products bypass these laws.
“Kalshi’s website and app show customers a number of events they can bet on and the odds of those different events, which means how much the bettor will be paid if the event occurs,” the press release said. “That’s how sportsbooks and other gambling services work. Kalshi advertises that it allows customers to ‘bet on anything’ by calling their service a ‘prediction market’ rather than ‘betting.’
The lawsuit said that Kalshi’s ads refer to “legal gambling,” and alleged that the company’s activities meet the state’s definitions of “gambling,” “gambling,” “betting” and other important federal provisions. It also included a provision stating that Kalshi’s products promote gambling addiction and specifically targeted college students.
Kalshi filed the suit in federal court, saying it had already litigated the issues in other federal courts and that it had received “no notice or communication” from Washington before the trial.
“If AG [Nicholas] Brown had not accused us before our scheduled meeting with him, he should have known better than to say we were offering war markets. We don’t do that,” Kalshi’s head of communications, Elisabeth Diana, told CoinDesk in a statement.
“As other courts have noted, Kalshi is a regulated, nationwide exchange for real world events, and is under special federal control. It is very different from what sports books and state-controlled casinos offer to their customers. We are confident in our legal arguments,” he added.
The Washington filing continues the government’s slide against the market’s pre-specified providers. Providers of prediction markets and their supporters, including the Chairman of the Commodity Futures Trading Commission Mike Selig, argue that these companies offer derivative contracts that are properly regulated at the federal level. States have argued that these companies offer gambling products disguised as something else and therefore should be regulated by national gambling laws.
Although market providers and both countries have had the first legal victory, this dispute may end up before the Supreme Court of the United States, legal experts told CoinDesk.
Nevada Actions
The suit came a week after Nevada won an appeals court victory allowing it to issue a temporary restraining order against Kalshi, forcing the company to withdraw its sports, entertainment and election contracts from the state for at least two weeks. A trial will be held at the end of those two weeks on Friday, April 3, where a national judge will decide whether to extend the ban.
Business publication Gambling Insider reported on Friday that Nevada users of Kalshi are still able to use the platform after the temporary restraining order went into effect.
Nevada has also obtained a preliminary injunction against Coinbase, requiring it to continue pausing its proposed market offerings in the state in an order on Thursday, March 26, following a temporary restraining order issued in early March.
Under Thursday’s order, Nevada District Judge for the First District Judicial Court Kristin Luis wrote that Coinbase did not object to “event-based deals” related to sports and other events, including college basketball games, college sports and football games and elections,” which meet the definition of “sports pools” defined under Nevada law.
Coinbase cooperated with Kalshi, the judge said. Like Kalshi’s order, this one orders Coinbase not to offer gaming, voting or entertainment contracts in Nevada, at least until the broader court case is resolved.
The judge gave Coinbase 60 days to “make technical improvements” to the order.
The district courts in Nevada and Washington are both part of the Ninth Circuit Court of Appeals.
Read more: Kalshi retains license to offer margin trading to institutional investors
UPDATE (March 28, 7:43 pm UTC): Updates the story with Kalshi’s spokesperson.
UPDATE (March 28 21:18 UTC): It adds more meaning.
#Washington #suing #Kalshi #states #step #legal #pressures #futures #markets