Massive Blow for Regulated Sports Betting
While sports prediction markets have already made a dent in the country’s thriving sports betting industry, the damage has been limited. These controversial markets were only offering markets to predict the winner of an event, meaning bettors had to visit a sportsbook to access spread, total, and prop bets.
With Kalshi’s new markets, that will no longer be the case. Users will now be able to stick with platforms like Robinhood for all their betting needs as the company continues its foray into sports betting.
Since prediction markets aren’t considered to be a form of gambling, they are not subjected to the same regulations and taxes. That will make it nearly impossible for them to compete with operators like Kalshi. Unless states alter their markets to give their legal sportsbooks a chance to level the playing field, it seems likely many customers will be won over by sports prediction markets.
Kalshi Doesn’t Fear Uncertain Future
While the new markets will give Kalshi and Robinhood a significant advantage over their rivals, their debut comes at a dangerous time. The operator is facing several legal battles from state operators seeking to ban the new industry. Kalshi has argued that sports prediction markets are not a form of gambling, but that will be harder with spread, total, and prop betting now available.
Despite that legal danger, Kalshi has decided to expand its offerings. This shows their confidence that the US legal system will eventually rule in the industry’s favor.
Is Kalshi’s Confidence Warranted?
Early results from lawsuits filed against Kalshi have been promising for the operator. Courts in Nevada and New Jersey have confirmed the company’s argument that the industry falls under the regulations of the CFTC, meaning states have no authority. However, other dangers are lurking for Kalshi.
One of those dangers is the increase in calls for the CFTC to investigate accusations against the previous chair and current nominee, Brian Quintenz. Several rivals have accused him of using his role with the regulator to access confidential financial data and share it with Kalshi, whose board he sits on.
These accusations have delayed Quintenz’s nomination and have caused significant pressure for the White House, whose goals for the regulator extend far beyond prediction markets. This could lead them to step back from their relationship with Kalshi and ask the CFTC to help crack down on the operator.
