Kalshi warns U.S. prediction markets could move offshore amid state oversight fight

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Kalshi warns on prediction markets

Highlights

Kalshi warns its prediction market business may move offshore if state regulators prevail in their legal fight over oversight authority against the CFTC.
New Jersey seeks U.S. Supreme Court review in a dispute over whether event contracts are illegal sports wagering, as the CFTC accelerates rulemaking to assert federal control.
Kalshi denies allegations of inflated trading volumes in bitcoin and ether perpetual futures, attributing activity to standard market maker practices.

Regulatory dispute centers on federal authority

As reported by CoinDesk, Mansour said at DC Fintech Week on Wednesday that the central question is not whether states or Washington should share oversight, but whether prediction markets can continue operating in the U.S. at all. He said Kalshi feels confident about its legal position even after federal appellate courts split on the issue, with one major ruling backing the company and two supporting the states' argument.

States including New Jersey are challenging Kalshi and other prediction market firms, arguing that their event contracts amount to illegal sports wagering that should fall under state gambling regulators. Kalshi and the CFTC have argued in court that prediction markets are federally regulated financial products and should remain under the sole supervision of the federal agency.

Mansour said sports-related event contracts have clear economic consequences and rejected the view that they fall outside federal financial regulation. He also argued that Kalshi's products fit within commodity definitions under the Commodity Exchange Act, which he said has evolved from agricultural futures to energy, metals and more complex financial instruments such as swaps.

CFTC steps up while Kalshi rejects volume concerns

The dispute is now drawing broader attention as New Jersey asks the U.S. Supreme Court to hear the case and outside groups including the National Football League submit views to the court. Mansour said the outcome will determine whether the industry develops under U.S. federal oversight or shifts offshore.

The CFTC is also taking faster action to strengthen its position in prediction markets. Last week, the agency issued one rule and proposed another aimed at placing event contracts within the definition of swaps, a move meant to clarify that they are policed by the CFTC rather than by state gambling authorities.

Mansour also pushed back against accusations that Kalshi inflated trading volumes in bitcoin and ether perpetual futures markets on its platform. He said recurring order sizes cited by critics reflect fixed-size orders from market makers, adding that misunderstanding of how markets function is fueling speculation on social media platform X.

Our earlier article on DigiPlus’ exit from New Zealand’s online gaming license auction explained how the company pulled back after reassessing market values and regulatory conditions, while keeping its existing operations unchanged. We also noted that DigiPlus is taking a more selective approach to international expansion as it weighs licensing rules, competition, and the potential earnings impact of higher customer acquisition and retention costs across markets.

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