Prediction market platform Kalshi has signed up to the National Council on Problem Gambling (NCPG), despite claiming it is not a gambling operator.
The company has grown exponentially since launching sports markets last year. After starting with a market on the Super Bowl, it now offers wagering on all major events, including esports.
State regulators have protested against its expansion, filing numerous lawsuits against the company, alleging it is offering unlicensed sports betting. Kalshi, however, argues it is not a gambling platform.
Yet, joining the NCPG would appear to be an admission that it is indeed offering users the chance to gamble.
Responsible Trading, Not Gambling
The NCPG said it has created a new membership subcategory specifically for Kalshi. It becomes the first financial services & trading category member.
This allows the NCPG to refrain from calling Kalshi a gambling company. In the press release, the organization notes that it “maintains a neutral position on the legality of specific gambling, wagering, or prediction products.”
The organization is quite explicit in its mission; however, which is to “mitigate harm and lessen the personal, social, and economic consequences of problem gambling.”
Heather L. Maurer, Executive Director of NCPG was careful not to use the word gambling when commenting on Kalshi, stating, “Innovation and responsibility can and must evolve together. Kalshi’s engagement demonstrates a commitment to mitigating harm before it occurs and ensuring support resources are accessible when they are needed.”
Could Kalshi’s Commitment Be Used Against It?
Kalshi has committed to investing $2 million over the next two years in the NCPG to aid its fight against problem gambling.
“At Kalshi, we believe in the power of prediction markets, and we are sensitive to the fact that they, like any financial trading products, come with risks,” said Tarek Mansour, co-founder and CEO of Kalshi. “As prediction markets continue to evolve, we are deeply committed to setting a new standard for responsible trading by investing in the tools, education, and protections needed to promote healthy participation and customer safety and hope that over time all trading platforms with significant retail participation follow suit.”
While its membership may be applauded in some quarters as a sign that the company is taking responsibility, it could also hurt its chances in court cases that hinge on whether judges see it as a gambling platform.
The line between trading and gambling has become increasingly blurred. Over 90% of Kalshi’s trading volume comes from sports contracts. Esports accounts for a significant portion of that volume, as do parlays.
In a court case arguing for the legality of election prediction markets, a Kalshi lawyer admitted that contracts on the Super Bowl or other sporting events would come under the category of gaming. The Commodity Exchange Act (CEA) says that contracts that fall under the category of gaming may be prohibited by the CFTC.
The lawyer’s words have been used against Kalshi in legal battles, with many state regulators citing this as evidence that sports prediction markets are gambling.
In joining the US’s primary nonprofit for tackling gambling harm, Kalshi may just have given opposing lawyers a new argument to use against it in court.
