addictioA Massachusetts judge on Tuesday questioned whether prediction-markets operator Kalshi could legally offer the state’s residents the ability to place financial bets on something as “trivial” as who wins sporting events without running afoul of gaming regulators.
Suffolk County Superior Court Judge Christopher Barry-Smith raised that question during a hearing in Boston as lawyers for the state urged him to bar Kalshi from continuing to operate what they contend is an unlicensed sports wagering enterprise offering an addictive product to consumers as young as 18.
The New York-based company gives its users the opportunity to profit from predictions on events ranging from sports and entertainment to politics and the economy. It began offering sports events contracts nationally in January.
While Kalshi is engaged in litigation with six other states that have accused it of flouting their gaming laws by offering users the ability to bet on the outcomes of sporting events like football and basketball, Massachusetts is the first to seek an injunction that would halt its operations.
Grant Mailand, a lawyer for Kalshi, told the judge that state gaming laws like Massachusetts’ do not apply to its sports events contracts, saying they are instead subject to the U.S. Commodity Futures Trading Commission’s exclusive jurisdiction.
He said the CFTC gained jurisdiction over its events contracts when Congress passed the Dodd-Frank Act in 2010 and gave the federal regulator the exclusive ability to oversee exchanged-traded “swaps,” a type of derivative contract.
But Judge Barry-Smith said a lay person hearing that argument would naturally wonder “how can that carry over and impact something as trivial as who wins a particular game?”
Assistant Attorney General Louisa Castrucci echoed that point, saying when Congress gave the CFTC oversight over swaps as it was focused on avoiding a repeat of 2008 financial crisis by regulating the instruments at the heart of it, not sports bets.
“A sports wager by any other name is still a sports wager,” Castrucci said.
Kalshi’s position recently suffered a major legal setback, when a federal judge in Nevada, a leader in gambling regulation, last month found that the company was subject to that state’s gaming rules, holding that the outcomes of sports matches do not legally constitute “events” under federal law.
Castrucci urged the judge to issue an injunction barring Kalshi from offering its sport events contracts in Massachusetts going forward, which Kalshi lawyer Mailand warned could be “massively disruptive to the market” and damaging for the company, which recently raised $1 billion at an $11 billion valuation.
Judge Barry-Smith said he planned to rule in January.
(Reporting by Nate Raymond in Boston, Editing by Alexia Garamfalvi, Bill Berkrot and Aurora Ellis)
Topics Trends Legislation Massachusetts
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