Prediction-based platforms, like Kalshi, are taking the US by storm – and traditional gambling operators are growing increasingly concerned about the economic threat posed by these non-state-regulated products.
Exemplifying this tension is the fact that Kalshi, a rising predictions platform, is taking legal action against several regulatory state bodies.
At the other end of the scale is a letter submitted to Congress by the Pennsylvania Gaming Control Board (PGCB), which believes that contract-focused markets present a tangible threat to the region’s existing gambling framework.
So, as both sides mount legal challenges and confusion grows among players, key questions beckon: which faction is winning this fledgling war, and why?
What’s the difference between prediction platforms and traditional gambling?
Crucially, predictions are not considered gambling by federal law. This form of wagering is regulated by the Commodity Futures Trading Commission (CFTC) rather than state authorities.
Unlike traditional sports and casino gambling, prediction platforms are based on contracts. Essentially, individuals buy ‘shares’ on whether a particular outcome will occur, with options for the weather, sports events and economic outcomes available.
Contrarily, state-regulated sportsbooks must obtain territorial licenses within each region where consumers interact with their platform. Each state’s gambling environment is overseen by a different regulatory body – forcing operators to abide by unique rules per sector.
And, as sports betting is defined as gambling, players must pay any applicable state and federal taxes. Following President Trump’s One Big Beautiful Bill Act (OBBBA), players engaging in traditional sports gambling can only deduct up to 90% of losses from annual tax returns.
Prediction platforms are not impacted by this rule change, and players can continue to deduct 100% of contract losses from taxes.
Legal warfare: Kalshi sues Ohio regulators following cease-and-desist order
The expansion of prediction platforms is escalating week-to-week – and with its continued growth comes ever-expanding tension between operators and states.
Recently, this culminated in Kalshi bringing litigation against the Ohio Casino Control Commission (OCCC), after the state had directed the predictions service to shutter its local online product.
In the lawsuit, Kalshi states that the OCCC-led action may “threaten” and “impair” all business operations. Further, the statement outlines that this lawsuit could “undermine confidence in the integrity of Kalshi’s platform, threaten its prospective business relationships and jeopardize Kalshi as a CFTC-approved exchange.”
Kalshi is now seeking a permanent injunction against the Ohio authority, as well as a temporary restraining order and declaratory relief.
However, it is not the first time that Kalshi has faced judicial pressure…
Several states tackling Kalshi in 2025
In September, Massachusetts Attorney General Andrea Joy Campbell brought a lawsuit against Kalshi in an effort to halt the operator’s entry into the state. The Democrat lawmaker argued that the New York-headquartered firm offers sports betting while disguised as a contract-based service.
Age limits represented another central issue, as Campbell admonished Kalshi’s ability to onboard players from the age of 18; the state’s legal age for sports betting stands at 21 years old.
Similar action was seen during March in New Jersey and Nevada, where unsuccessful cease-and-desist orders were presented against Kalshi. Maryland’s injunction against Kalshi succeeded without issue – though the operator is expected to appeal the decision.
Anti-predictions groups in Georgia, Kentucky and Illinois are also poised for attempts to bring the hammer down on Kalshi.
Meanwhile, South Carolina’s battle with Kalshi has been moved to federal courts – where The Palmetto State plots to recover losses endured by players based on a 1710 statute that makes certain gambling debts “unenforceable” due to alleged violations of “both state and federal law“.
Pennsylvania urges lawmakers to alter definition of prediction platforms
One of the most pressing cases against Kalshi stems from the Pennsylvania Gaming Control Board (PCGB). In September, the PGCB sent a letter to Congress detailing concerns around the current definition of prediction platforms – and encouraged lawmakers to clarify that these websites facilitate gambling.
Also included in the official message were allegations that prediction platforms knowingly bypass strict certification rules tied to sports betting. In turn, sites like Kalshi are not held to the same standards as DraftKings, FanDuel, BetRivers and other major regulated sportsbooks.
PGCB Executive Director, Kevin O’Toole, explains the equality gap in the communication: “This creates an uneven playing field where prediction markets could gain a competitive advantage by exploiting a perceived loophole between federal financial regulation and state gaming law.
“Perhaps most troubling, the CFTC regulates a system that allows wagers on events that a single person can control – something the PGCB would never allow.”
This PGCB letter heralds the beginning of a new type of battle for Kalshi and similar operators. While previous action took place on a state level, the PGCB’s submission brings the fight to a national scale, where federal eyes might not look fondly upon contract-based sports predictions.
Kalshi’s value booms despite legal skirmishes
The aforementioned legal proceedings have done little to diminish Kalshi’s market value, which now stands above $5bn in the wake of $300m investment from private backers.
It is a notable increase – and showcases a doubling of the company’s value within just four months.
Pertinently, DraftKings’ stock dropped by over 5% concurrent with the news of Kalshi’s investment announcement. Even without legal tugs of war or public declarations against one another, it is clear that there is a living, breathing battle between traditional gambling operators and prediction sites.
Flutter CEO dubs prediction platforms a “familiar” foe
Speaking at G2E 2025, Flutter CEO Peter Jackson expressed that he is “reasonably familiar” with the prediction-based websites.
Jackson was quick to point out that certain elements of Kalshi’s product appear “suspiciously like sports betting” – but remains confident that his team is “well placed” to perform across multiple sectors.
Acting Indian Gaming Association (IGA) Chairman, David Bean, was less favorable toward prediction platforms in a Q&A session at the Global Gaming Expo in Los Angeles: “We’ve had many threats, but this (prediction platforms) is by far one of the biggest. I anticipate continuously defending against it.”
As the line between gambling and investing continues to thin, one detail remains clear: states and sportsbooks will not relinquish control of the regulated market without a multi-pronged fight.
