The legal battle concerning Kalshi, a rapidly expanding prediction market platform, has intensified as tribal groups reference a recent US Supreme Court decision to bolster their arguments.

Tribes Argue SCOTUS Ruling Shows CFTC Oversight Gaps

In a filing on July 1, more than 65 tribes and tribal organizations claimed that the Supreme Court’s June 27 ruling in Federal Communications Commission v. Consumers’ Research supports their argument that the Commodity Futures Trading Commission (CFTC) lacks adequate oversight of Kalshi’s event-based contracts.

Kalshi, providing yes-no contracts on events ranging from elections to sports, has emerged as a significant player in prediction markets. It began offering Super Bowl-related contracts earlier this year, drawing opposition from state regulators and tribal governments. Despite having federal approval from the CFTC, critics argue it operates beyond typical gambling regulations and taxation.

Tribal groups perceive Kalshi’s operations as a direct threat to their sovereign rights and gaming revenue. The Indian Gaming Regulatory Act (IGRA) grants tribes complete control over gaming on their lands. Tribes warn that allowing Kalshi to continue unchecked could damage tribal economies that rely on gaming to finance essential services.

They highlight a recent Supreme Court decision imposing stricter requirements for federal agencies to vet products before companies can self-certify. Conversely, the CFTC permits platforms like Kalshi to self-certify contracts with minimal scrutiny. Tribal representatives assert that this discrepancy exposes the CFTC’s weak oversight and undermines Kalshi’s legal position.

Amid State and Tribal Lawsuits, Kalshi Secures $185M and Pursues Broader Market Reach

Kalshi is already facing similar challenges in several states, including Maryland, where tribal groups filed another supporting brief against the platform. Prominent attorneys from 34 states have also supported New Jersey, alleging that Kalshi’s contracts function as unregulated sports betting.

As legal challenges mount, Kalshi continues to expand. The New York company secured $185 million in a major Series C funding round in late June, led by Paradigm, raising Kalshi’s value to $2 billion. High-profile investors like Sequoia Capital and Citadel Securities’ CEO Peng Zhao also contributed funds. Kalshi intends to utilize these resources to enhance its technology and establish new partnerships, aiming to integrate its platform into more trading apps like Robinhood and Webull.

Despite regulatory hurdles, Kalshi’s leadership remains resolute. CEO Tarek Mansour described the situation as a challenging endeavor to sustain prediction markets. He emphasized Kalshi’s substantial user base and record-breaking trading volumes in sports and political markets. The Third Circuit is set to review the latest filings in the coming weeks, with potential hearings scheduled for September. The outcome could significantly impact not only Kalshi’s future but also the regulation of prediction markets across the US.

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• Source: SCCGManagement.com