Add another state to the bucket of cease-and-desist letters to predictive markets Kalshi and Robinhood.
First reported by Dustin Gouker's The Closing Line late Thursday afternoon, the New Jersey Department of Gaming Enforcement (NJDGE) issued a cease-and-desist letter to both platforms for offering "unauthorized sports wagering." Both companies were issued a Friday deadline of 11:59 p.m. ET to comply.
The letters were addressed to Kalshi CEO Tarek Mansour and Robinhood CEO Vlad Tenev.
Launched in July 2021, Kalshi is a U.S.-based financial exchange offering event contracts and is the first federally regulated exchange for trading on real-world events, economics, politics, entertainment, cultures, and sporting events.
The contents
NJDGE interim director Mary Jo Flaherty sent one-page, four-paragraph letters to each company.
In them, the department determined Kalshi “listed unauthorized sports wagers” within the state of New Jersey.
“This activity constitutes a violation of the New Jersey Sports Wagering Act, which only permits licensed entities to offer sports wagering to patrons located in New Jersey,” Flaherty wrote.
“Further, Kalshi is currently offering unauthorized sports wagering to New Jersey residents on collegiate sporting events occurring in New Jersey in violation of the New Jersey Constitution. That constitutional provision mandates that 'wagering shall not be permitted on a college sport or athletic event that takes place in New Jersey or on a sport or athletic event in which any New Jersey college team participates regardless of where the event takes place.'”
Not only does the NJDGE demand the company cease and desist from offering any form of New Jersey sports betting, the division also insists Kalshi “void any such wagers already placed.”
Both letters were issued a couple of hours prior to the start of the NCAA men's college basketball tournament East Regional Sweet 16 matchups at the Prudential Center in Newark, New Jersey.
Legally, New Jersey residents cannot wager on any New Jersey collegiate team (home or away) and cannot place a bet on a collegiate sporting event held within the state, even though New Jersey teams are not participating. So, for Alabama, Arizona, BYU, and Duke fans within the Garden State, they can only watch for the pure enjoyment of the sport.
This month, Kalshi introduced “March Madness” single game-betting markets in all 50 states, whether sports betting is legal in that state or not for both the NCAA men's and women's college basketball tournaments. All the markets in all the states are offered via an exchange, rather than "against the house.”
Just last week, both companies joined forces to offer “sports event trading” on both tournaments. Kalshi skyrocketed to prominence with last November's Presidential Election and started offering sporting event markets including the Super Bowl earlier this year.
Earlier this month, Nevada became the first state to take official action against Kalshi and its prediction market platform and the Massachusetts Secretary of State's office issued a subpoena to Robinhood earlier this week seeking information about its recently launched sports betting prediction market.
Kalshi, Robinhood official statements
Both Kalshi and Robinhood provided official statements on the matter.
“Kalshi believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission. We look forward to engaging with the state of New Jersey to resolve this matter,” said a Kalshi spokesperson in an email to Covers Thursday evening.
“Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner,” said a Robinhood spokesperson in an email to Covers. “While we do not believe these contracts run afoul of any state laws, we are no longer allowing New Jersey residents to enter new positions for the Men’s and Women’s Basketball Tournament event contracts.”
Robinhood did add that this action only impacts contracts related to the men's and women's college basketball tournaments. New Jersey residents will still be able to access their prediction markets hub and contracts on other categories.
