The New Jersey Division of Gaming Enforcement (NJDGE) has issued cease-and-desist orders to prediction market platform Kalshi and monetary buying and selling agency Robinhood, demanding that they instantly stop providing sports activities wagering providers within the state. The regulatory motion, confirmed Thursday, cites violations of New Jersey’s strict sports activities betting legal guidelines and requires each platforms to void any wagers positioned by New Jersey residents.
The NJDGE asserts that Kalshi and Robinhood are working with out the required state-level authorization, violating the New Jersey Sports activities Wagering Act. Each firms got a deadline of 11:59 p.m. on Friday to conform or face potential authorized penalties.
The Allegations Towards Kalshi and Robinhood
Within the cease-and-desist letter addressed to Kalshi CEO Tarek Mansour, which was first revealed by The Closing Line, NJDGE Interim Director Mary Jo Flaherty said that Kalshi had been discovered to record unauthorized sports activities wagers accessible to people in New Jersey. Particularly, the letter pointed to Kalshi’s involvement in providing prediction markets on collegiate sporting occasions, together with matchups happening within the state, which immediately contravenes the New Jersey Structure.
“Additional, Kalshi is at present providing unauthorized sports activities wagering to New Jersey residents on collegiate sporting occasions occurring in New Jersey in violation of the New Jersey Structure,” the letter states. “That constitutional provision mandates that ‘wagering shall not be permitted on a school sport or athletic occasion that takes place in New Jersey or on a sport or athletic occasion wherein any New Jersey faculty staff participates no matter the place the occasion takes place.’”
Equally, Robinhood CEO Vlad Tenev obtained such a letter wherein his firm was accused of enabling sports activities occasion buying and selling via its platform in collaboration with Kalshi. The NJDGE’s letter required each platforms to supply written affirmation by the deadline that they’d ceased all sports activities wagering operations concentrating on New Jersey residents.
The Rise of Sports activities Occasion Buying and selling and Regulatory Pushback
Kalshi, launched in 2021, has positioned itself as a federally regulated monetary trade permitting customers to commerce occasion contracts on varied real-world occasions. Not too long ago, the platform launched sports-related markets, beginning with futures buying and selling on main occasions such because the Tremendous Bowl earlier than increasing to incorporate March Insanity matchups.
Final week, Kalshi partnered with Robinhood to supply a brand new characteristic referred to as “sports activities occasion buying and selling” for the NCAA males’s and girls’s basketball tournaments. These markets, marketed as occasion contracts relatively than conventional wagers, enable customers to purchase and promote positions primarily based on sport outcomes via an trade mannequin, relatively than towards a bookmaker.
Regardless of Kalshi working underneath the oversight of the Commodity Futures Buying and selling Fee (CFTC), state regulators in New Jersey argue that these choices represent unauthorized sports activities betting underneath state legislation. The NJDGE’s place aligns with comparable regulatory challenges Kalshi and Robinhood are dealing with in different jurisdictions.
Broader Regulatory Scrutiny
New Jersey just isn’t the primary state to take motion towards Kalshi’s sports activities buying and selling markets. Earlier this month, Nevada issued a cease-and-desist order towards Kalshi, although enforcement measures have but to be applied. Moreover, Robinhood is underneath investigation by the Massachusetts Securities Division regarding potential violations of state securities legal guidelines associated to its involvement in sports activities prediction markets.
The introduction of sports activities occasion contracts represents a rising overlap between monetary buying and selling and conventional sports activities betting, prompting authorized scrutiny from regulators throughout a number of states. Whereas Kalshi and Robinhood keep that their choices differ from typical sports activities playing, regulatory our bodies stay unconvinced.
Official Responses from Kalshi and Robinhood
In response to the NJDGE’s order, Kalshi reaffirmed its dedication to regulatory compliance whereas signaling a willingness to interact with state officers to resolve the matter. “Kalshi believes within the worth of regulation and operates underneath the excellent oversight of the Commodity Futures Buying and selling Fee. We sit up for partaking with the state of New Jersey to resolve this matter,” a Kalshi spokesperson said.
Robinhood additionally defended its place, arguing that its occasion contracts adjust to federal rules. “Occasion contracts provided by Robinhood Derivatives are federally regulated by the CFTC and provided via CFTC-registered entities, assuring that retail prospects can entry these prediction markets in a protected and controlled method,” a Robinhood spokesperson mentioned. Nevertheless, the corporate additionally acknowledged that it had halted new positions for the NCAA basketball match contracts in New Jersey to adjust to the order.
