Prediction Markets at Risk as States Weigh In

Background

Kalshi CEO Tarek Mansour has warned that state oversight of US prediction markets could push them offshore.

The Warning

Mansour argues that if individual states take over the policing of US prediction markets, the markets themselves will leave.

Industry Impact

The warning arrives as Kalshi fights legal battles on multiple fronts. Several states are trying to classify its sports-event contracts as illegal gambling, and the courts cannot agree on who is right.

Federal Oversight

Kalshi operates as a designated contract market under the Commodity Futures Trading Commission. The company's position is that this federal oversight preempts state gambling laws.

State Response

States see it differently. To them, a contract that pays out based on who wins a football game looks a lot like a sports bet, whatever the paperwork says.

Legal Battles

The federal appeals courts have now split on the question. In 2026, the Third Circuit backed Kalshi's preemption argument in a New Jersey case. The Ninth and Sixth Circuits went the other way, upholding states' authority to enforce their gambling rules.

Offshore Argument

Kalshi has been making the offshore case in front of lawmakers, not just in press interviews. During a Texas Senate hearing in September 2026, the company's legal counsel Robert DeNault told legislators that banning federally regulated prediction markets would backfire.

Industry Consequences

The offshore argument, made under oath, highlights the risks for the industry. The outcome of the legal battles could shape how crypto firms approach similar products.

Sports and Revenue

The fight matters so much to Kalshi because sports have been the engine of its revenue. In 2025, sports contracts accounted for about 95% of the company's revenue.

Conclusion

The industry is operating under two incompatible legal maps. The outcome of the legal battles could have significant consequences for the crypto industry.