Kalshi is suing the Ohio Casino Control Commission after the regulator demanded it stop offering sports predictions in the state by Oct. 20.
The lawsuit, filed Tuesday in the U.S. District Court for the Southern District of Ohio, names OCCC Executive Director Matthew Schuler, all board members of the regulatory commission and Ohio Atty. Gen. Dave Yost as defendants.
Kalshi is asking for a preliminary injunction to prevent Ohio from trying to shut it down, which Kalshi contends would violate the Supremacy Clause.
Ohio ‘unpersuaded’ by Kalshi’s arguments
The two sides held a call on Sept. 25 to address points of contention they have been emailing about since the cease-and-desist was issued on March 31.
A representative for the OCCC told Kalshi it would respond in writing but that it was “unlikely to further extend the deadline” of the cease-and-desist. The regulator then informed Kalshi on Monday that it was “unpersuaded” that Kalshi’s sports predictions were “preempted by federal law as Kalshi contends” and asked for confirmation of the end of its services in the state by Oct. 20.
“Consequently, to the extent Kalshi chooses to continue to offer unlicensed and unregulated sports gaming in the form of sporting event contracts within Ohio, Kalshi will be violating Ohio law,” the OCCC said.
Kalshi calls out targeting partners
The OCCC sent a letter to sports betting licensees on Aug. 25 notifying them that it may take administrative actions against companies that accept sports predictions through a partnership with a designated contract market regardless of where it happens.
“The Casino Commission’s message to its gaming licensees has been clear: If you or your affiliates do business with Kalshi anywhere in the country, we will retaliate,” the complaint reads.
Kalshi said the “threat” to licensees subjects it to “extraordinary harm.” “Several” operators with Ohio gaming licenses have contacted Kalshi about predictions, but are reluctant to move forward and are reconsidering signed term sheets, according to the complaint.
“These prospective partners expressed reluctance to put their Ohio license at risk by challenging the Casino Commission,” the complaint says. ” … Some of these prospective business partners have millions of active users. The loss of these users, should the business partners acquiesce to the Casino Commission’s unlawful threat, would present a massive disruption for Kalshi financially and reputationally.”
Ohio: not ‘unusual’ to monitor licensees
The letter sent Monday by the OCCC noted that gaming regulators routinely look at how licensees operate in other jurisdictions. Arizona‘s gambling regulator sent a similar message about predictions to its licensees in September.
“There is nothing unusual about this practice: state gaming regulators continually evaluate a gaming licensee’s suitability to maintain its licensure, which includes ascertaining whether a licensee forges a business relationship with an illegal operator in that state,” reads the letter. “This occurs in all phases of legalized gaming, including casino gaming, sports gaming, fantasy contests, and skill-based amusement gaming in Ohio, and across all licensure types, from operators to providers to suppliers and to employees.
“The Commission therefore does not presently intend to alter the Advisement.”
The letter to licensees was meant to start conversations about predictions, which it has, the regulator added.
Add it to the list
This is just the latest lawsuit to involve Kalshi and a U.S. jurisdiction that regulates sports betting, no matter which side either is on.
Until this lawsuit, the most recent was the lawsuit from the Massachusetts Attorney General against Kalshi and one of its broker partners, Robinhood.
The legal battle is not shaking out the same way in every state, either. For example, Kalshi was denied a preliminary injunction in Maryland despite securing one in both New Jersey and Nevada.
