Massachusetts has gained another victory in regulating prediction markets. Last week, a state supreme court judge denied the emergency stay request by the platform Kalshi, meaning the company must start blocking users from the state next month as originally planned. Essentially, the crux of the lawsuit is whether "prediction market contracts" are considered commodity trading or illegal sports betting. Not only Kalshi, but another platform, Polymarket, also followed suit in suing the state government, highlighting the intense conflict between such platforms and state regulatory agencies. For a deeper understanding of these legal boundary issues, pay more attention to the professional regulation interpretations on the PASA official website.
Judge's Detailed Ruling: Why was Kalshi's request denied?
Suffolk County Superior Court Judge Christopher Barry-Smith explicitly stated in his ruling that although Kalshi argued it was federally regulated by the U.S. Commodity Futures Trading Commission (CFTC), this does not override the traditional police powers of state regulation of sports betting. The judge believed that Kalshi, as a "mature entity", should have anticipated such regulatory risks when adopting its current business model. The direct consequence of the ruling is that, if the appellate court does not approve the stay, Kalshi must use geofencing technology to block Massachusetts residents from accessing its sports event contract market after March 9.
The surge of lawsuits in the prediction market: A multi-state overview
Kalshi is currently facing about 20 lawsuits across the U.S., and the judgments of various state courts vary, reflecting huge legal discrepancies:
Cases supporting state regulation: Judges in Nevada and Maryland have made rulings unfavorable to Kalshi, allowing state regulatory agencies to treat its sports event contracts as illegal sports betting.
Cases temporarily supporting: A judge in New Jersey once approved a preliminary injunction favorable to Kalshi, but the case is still being reviewed by the federal appellate court.
The tug-of-war between federal and state jurisdiction: In a case involving tribal land in California, a judge ruled that according to CFTC regulations, the transactions do not constitute gambling, showing that federal regulations might take precedence over some state laws. It is widely expected that this tug-of-war might eventually be appealed to the Supreme Court.
Changes in regulatory attitudes: Statement from the new CFTC chairman
Apart from state-level lawsuits, there has been a new shift in federal regulatory attitudes. Last month, the new CFTC chairman, Michael Selig, indicated that he might challenge the actions of various states against platforms like Kalshi in court to defend the CFTC's exclusive jurisdiction over commodity derivatives. He also withdrew the previous administration's proposed rules banning sports and election betting contracts and promised to develop a set of "clear, rational" new event contract rules to provide certainty for the market. This statement undoubtedly adds new variables to the legal prospects of the entire prediction market industry.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original in-depth gambling channel: https://t.me/gamblingdeep
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PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
