What Kalshi win in California prediction markets means for market

Prediction markets operator Kalshi gained courtroom momentum this week, securing a favourable ruling in California. The company also expanded its national reach through a new partnership with PrizePicks that was announced on Friday.

The developments highlight both the legal complexity and rapid evolution of event-trading markets across the United States.

This week, the US District Court for the Northern District of California denied a motion from three tribes to prohibit Kalshi from operating on tribal lands in the Golden State. The Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians and Picayune Rancheria of the Chukchansi Indians filed the lawsuit against Kalshi in July, arguing its offerings on tribal land violate the Indian Gaming Regulatory Act. Tribes have Class III gambling exclusivity in California.

The ruling states because Kalshi is federally regulated through the Commodity Futures Trading Commission (CFTC), the Unlawful Internet Gambling Enforcement Act applies to Kalshi and its “internet contracts are not bets or wagers under the UIGEA and therefore do not constitute ‘unlawful internet gambling’ even if the contracts are received, placed or transmitted from persons on Indian lands where internet gambling is illegal.”

“The court does not take lightly plaintiffs’ concerns about the effects Kalshi’s activities might have on tribal sovereignty and the tribes’ finances,” the ruling reads. “Indeed, by self-certifying the legality of its event contracts in a way that insulates its activities from judicial review, Kalshi may have found a way around prohibitions on interstate gambling that were created with the tribes’ best interest in mind.

“But, on the record currently before the court, and in light of the Commodity Exchange Act’s self-certification process, plaintiffs have not met their burden of showing a likelihood of success on their IGRA claim.”

Prediction markets in court across US

California is not the only state with tribal gaming interests looking to stop Kalshi offerings on tribal land, as Wisconsin’s Ho-Chunk Nation also filed a lawsuit against the prediction markets operator.

Kalshi is in multiple court battles across the US in states where regulators argue it is offering gambling without appropriate licensure. In New Jersey and Nevada, Kalshi received initial injunctions to prevent regulatory enforcement. In Maryland, a judge denied Kalshi’s request for a preliminary injunction. Those cases are under appeal.

Meanwhile there are also court cases in Massachusetts, New York and Ohio. Other states, including Arizona, Illinois and Montana, sent cease-and-desist letters to Kalshi. Also, 34 state attorneys general filed a brief supporting New Jersey’s court case.

Trading platforms including Robinhood and Crypto.com are also facing legal challenges about their prediction markets offerings. Crypto.com recently pulled out of Nevada amid an ongoing lawsuit with the Nevada Gaming Control Board. In Massachusetts, a judge ruled Robinhood cannot block the state’s gambling enforcement.

PrizePicks launches event trading product

On Friday, daily fantasy sports operator PrizePicks announced it is live in 38 states with prediction markets through a multi-year partnership with Kalshi. The DFS company agreed to sell to international gaming giant Allwyn last month in a $1.6 billion deal.

The offering comes through PrizePicks subsidiary Performance Predictions II, a federally approved Futures Commission Merchant. An FCM registration allows PrizePicks to offer prediction market contracts approved by the CFTC.

“Expanding into prediction markets delivers on what our customers want, innovative products with more ways to play,” PrizePicks CEO Mike Ybarra said in a release. “Together with Kalshi, we will welcome new customers across many states to the PrizePicks experience, and we couldn’t be more excited about the opportunity ahead in this fast-growing space.”

Earlier this week, PrizePicks announced a partnership with prediction market competitor Polymarket. Polymarket’s full reentry into the US was delayed by the government shutdown, but the partnership remains in place and PrizePicks will offer markets from multiple exchanges.

Customers will be able to trade on sports, entertainment and pop culture on the PrizePicks app through Kalshi’s library of offerings.

PrizePicks is not alone in its foray into prediction markets products. Underdog, which like PrizePicks started as a daily fantasy sports operator, also recently launched prediction market offerings. Underdog has also launched a sports betting product.

Despite multiple states warning sportsbooks that offering prediction markets might affect their licences, market-leading sports betting operators FanDuel and DraftKings are both readying launches of event trading platforms.