Kalshi and prediction market sector embroiled in mixed bag of legal fights across U.S.

Kalshi is putting a hefty bet on its legal wrangling as the prediction markets firm fights for its survival in the potentially existential question: Are its users gambling or purchasing derivatives?

The leading U.S. prediction markets business and the rest of the rapidly growing event-contract industry, which has been making a big public splash in marketing and advertising to disrupt sports betting in the same way that ride-share services did to taxi drivers, still needs definitive U.S. court rulings to cement its legal footing. Having the federal derivatives regulator on its side may help, but it's currently combating states across the country, with the latest dispute seeing court action in Minnesota on Thursday.

While lawyers for the industry and Minnesota made oral arguments in Kalshi's bid to halt the state's decision to ban prediction markets as illegal activity, other legal pots were also boiling over.

In the Nevada Supreme Court, Kalshi lost an effort a few days ago to halt a requirement that it block its customers in the state from much of the platform's trading activity. The denial signed by three state justices on Wednesday said they were "not persuaded" by the business' emergency motion, and Kalshi may also face legal trouble for failing to geofence its business by a court-imposed deadline.

In Ohio, Kalshi sued the gaming regulator on Monday — following earlier, parallel court arguments from the Commodity Futures Trading Commission — seeking to halt Ohio's penalty against the company on accusations it's run an unlicensed sports-betting operation.

The next day, a local court in Michigan granted that state's gaming regulators a temporary, two-week restraining order against Kalshi to stop it from offering, advertising or facilitating sports betting there.

"Kalshi is targeting Michigan's most vulnerable residents with sports betting dressed up as investing — and without intervention, the harm will keep getting worse,” said Michigan Gaming Control Board Executive Director Henry Williams in a Tuesday statement.

On the positive side for prediction platforms: The CFTC and its pro-innovation chairman, Mike Selig, are aggressively trying to make the case that Kalshi and the others belong under the sole jurisdiction of the agency as the U.S. derivatives regulator, arguing in its own lawsuits against several states that the contracts sold in the prediction markets are effectively the same as those an agricultural business might buy to hedge against future crop prices changes.