Kalshi CEO Warns State Oversight Could Drive U.S. Prediction Markets Offshore

Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

• Why does Kalshi’s CEO believe state-level regulation could push prediction markets outside the United States?


• What is at stake in the dispute between state gambling regulators and the federal government?

Main Topic

The debate over who should regulate U.S. prediction markets has become a high-profile legal and policy dispute. At its center is Kalshi, a prediction-market company whose business includes contracts tied to the outcome of future events. Its chief executive, Tarek Mansour, argues that the central question is not simply whether states or the federal government should oversee these markets. In his view, the more consequential issue is whether the markets can continue operating in the United States or will be driven offshore.

Mansour made the comments at DC Fintech Week, an event held near Washington. Despite several court decisions that have not favored Kalshi’s position, he said he felt “pretty good” about the company’s overall legal standing in the country. His remarks reflect Kalshi’s continuing effort to establish that its event contracts belong within a federal financial regulatory framework rather than under the separate gambling laws and authorities of individual states.

The disagreement has sharpened as prediction markets have expanded and attracted attention to contracts related to sports. A growing number of states have challenged Kalshi and other firms in court, alleging that sports-related contracts amount to unlawful sports wagering. Those states argue that such activity falls within the remit of state gambling regulators. Kalshi, together with the federal regulator responsible for its exchange, has countered that federal oversight is appropriate and should be the exclusive framework for these markets.

For Mansour, the characterization of sports contracts as having no meaningful economic consequences is unpersuasive. He rejected the argument that sports betting lacks the economic significance needed to support classification as federally regulated financial contracts. “The notion that sports does not have economic consequence is ludicrous,” he said. His position is that the nature and economic effects of a contract, rather than its connection to a particular subject, should inform how it is regulated.

Mansour framed the legal dispute as a choice between keeping prediction markets in the United States and forcing them to operate offshore. He said, “It's not a choice of state versus federal market. It's a choice of whether prediction markets exist in the U.S. or whether they go offshore.” This is Kalshi’s central policy argument: a fragmented or restrictive state-by-state system could make it difficult for companies to offer these products domestically, while a federal framework could provide a single regulatory structure.

The legal situation remains unsettled. The dispute has reached multiple federal appellate courts, and their decisions have diverged. One significant ruling supported Kalshi’s position, while two others backed the states’ view. With the courts split, New Jersey asked the U.S. Supreme Court to hear the case. Prominent organizations have also submitted views to the high court, including the National Football League. The outcome could influence not only Kalshi but also how similar event-contract businesses are treated across the country.

Kalshi’s legal argument is connected to how the company understands its products under federal commodities law. Mansour said he had considered the regulatory relationship from the company’s beginnings and believed its activity fit within the definitions of a commodity. He pointed to the Commodity Exchange Act, describing it as a “truly beautiful statute” because it enabled markets to evolve beyond their early association with agricultural futures.

In Mansour’s account, the law’s scope has accommodated products tied to oil and metals, as well as less tangible financial instruments such as swaps. Kalshi’s argument is that event contracts can be understood within this broader history of changing financial products. The state-side position, by contrast, emphasizes that contracts connected to sports outcomes can resemble wagers and should therefore be subject to state gambling rules. These competing interpretations concern both the legal classification of the products and the level of government that should supervise them.

The Commodity Futures Trading Commission (CFTC), the federal regulator overseeing Kalshi’s exchange, has taken steps to reinforce its authority over prediction markets. It recently issued a rule and proposed another measure intended to bring event contracts within the definition of swaps. The stated purpose of these actions is to place such contracts under the agency’s oversight rather than under state gambling regulators. The measures form part of a broader regulatory effort, while the courts continue to consider the underlying jurisdictional questions.

Mansour also addressed criticism about trading volume in bitcoin and ether perpetual-futures markets on Kalshi’s platform. Some questions focused on repeated trade sizes that appeared to represent a significant share of the platform’s volume. On social media platform X, formerly Twitter, some observers interpreted these patterns as possible evidence of inflated volume. Mansour dismissed the claims, saying that “there's a lot of crazy” on the platform and attributing the recurring order sizes to market makers placing fixed-size orders.

He said online reactions had treated a visible increase in activity as proof of volume inflation, which he rejected. Mansour’s explanation was that fixed-size orders from market makers could create patterns that look unusual to people unfamiliar with market mechanics. He also used the discussion to make a broader point: “Maybe the broader point about this is how much people misunderstand markets,” he said. “They're just complicated. They're not easy to understand.”

These comments raise a separate but related issue: the importance of transparency and clear explanations in newer financial markets. Market participants, regulators, and observers may interpret trading patterns differently, particularly when a platform offers products that are unfamiliar to much of the public. Explaining how market makers operate and how trading volume is measured can help clarify disputed claims, although such explanations do not replace independent scrutiny or regulatory oversight.

The dispute therefore brings together several questions: how event contracts should be classified, which regulators have authority over them, and how trading activity should be understood and monitored. A federal approach may offer consistent rules across state lines, while state regulators may argue that sports-related products fall within longstanding gambling oversight. The courts’ differing rulings demonstrate that these competing views have not yet been resolved.

For Kalshi, the immediate legal challenge is to preserve its ability to offer contracts within the United States under federal supervision. For states, the challenge is to maintain authority over products they view as sports wagering. For federal regulators, the task is to define how event contracts fit within existing financial laws and how to supervise them effectively. The eventual resolution could shape the structure of prediction markets and clarify the boundaries between financial regulation and gambling regulation.

Key Insights Table

Afterwards...

The future of prediction markets will depend on more than the outcome of a single court case. Policymakers and courts will need to consider how existing financial statutes apply to contracts based on real-world events, how state consumer-protection interests interact with federal market regulation, and what standards can support fair and transparent trading. A durable framework will need to distinguish products by their structure and risks rather than relying only on broad labels.

Further work is also needed to make market operations easier to understand. Clearer disclosure about order types, market-maker activity, and the calculation of trading volume could help the public and regulators assess claims about market behavior. Independent monitoring and accessible explanations would be especially valuable as prediction markets develop new products and reach wider audiences.

The larger challenge is to build oversight that protects the integrity of markets without unnecessarily limiting responsible innovation. Continued legal analysis, transparent regulatory processes, and careful evaluation of how event contracts function can help determine whether the industry develops under a coherent U.S. framework or shifts its activity elsewhere. As courts and regulators continue their work, the balance between innovation, consumer protection, and jurisdiction will remain central to the debate.