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The popular prediction market platform Kalshi filed a lawsuit against Montana's Attorney General Austin Knudsen on Tuesday.
Kalshi argues the state has no right to prohibit it from operating in Montana.
So far, Kalshi has sued six other US states:
- New York
- Ohio
- Nevada
- Maryland
- New Jersey
- Connecticut
Kalshi insists they do not offer gambling but instead allow customers to trade on simple YES and No “event contracts". They also trade against one another, unlike traditional online sportsbooks where odds are set by the book itself (oddsmakers). Kalshi does not offer spreads, unlike a typical sportsbook.
“Because traders do not take a position against the exchange itself, traders’ ability to hedge risk requires counterparties willing to assume risk in the hope of seeing a return,” the company’s attorneys said in their complaint.
Last year, an attorney representing the Montana Department of Justice’s Gambling Control Division sent Kalshi a cease-and-desist letter, saying that they had found probable cause that the company’s operations were gambling.
Montana was one of four states that had the ability to allow sports betting prior to the US Supreme Court overturning decades of prohibition known as The Professional and Amateur Sports Protection Act of 1992 (PASPA).
Montana qualified for a “grandfather clause” due to it already having limited sports-related wagering. They offered sports pools and sports tab games offered via the state lottery.
The state fully regulated sports gambling in 2018 but only in taverns and on kiosks. Montana does not regulate mobile sports betting, though prediction markets and offshore sportsbooks are still accessible to those in the state.
Kalshi argues their operations are regulated by the federal Commodity Futures Trading Commission.
“One of Congress’s avowed goals in creating the CFTC was to avoid the ‘chaos’ that would result from subjecting exchanges to a patchwork of 50 different—and potentially conflicting—state law,” the company’s attorneys wrote in their federal complaint.
KTVH reports that attorneys said Kalshi believed it had reached an agreement with the state to delay any enforcement while a federal appeals court hears arguments in a similar case centered on Kalshi’s operations in Nevada. However, they said the state sent another cease-and-desist letter last week.
- Gilbert Horowitz, Gambling911.com
