Last week, forecast market startup Kalshi sued New Jersey and Nevada after attempting to shut down its recently launched sports trading business. The lawsuit argued that the state game boards have no authority to set rules because it is a federally regulated platform.
“We’re not necessarily very concerned (because it’s regulated at the federal level,” Karsi CEO Tarek Mansour said last week at a strict event in San Francisco. “State laws don’t actually apply.”
If Kalshi wins these lawsuits, the startup can secure its position in a lucrative market for sports betting. But the legal challenges could pave the way for conflicts between state regulators and the Trump administration.
This is not the first time Mansoor has challenged the authority of regulators. Last year, Calci won a massive legal battle with the Commodity Futures Trade Commission (CFTC) and was able to handle more than $1 billion in trade based on the results of the 2024 political elections.
“We’ve had to eat a lot of S in the last five years,” Mansour said in the fight against the CFTC. “I’ll do it again with Heartbeat.”
From political elections to sports
In January, Calci jumped into the forecast market for sporting events, allowing users across the country to place bets on March Madness and Super Bowl results, even in 11 states where gambling is illegal.
However, six states where sports betting is legal (Nevada, New Jersey, Illinois, Maryland, Ohio and Montana) have sent Calci ceasefire and assumption letters claiming the sports forecast market is a de facto sport bet. The state’s gaming board has argued that calci is not properly licensed and will not pay state taxes on the sports transactions it offers.
“We have a license. It’s due to the CFTC,” Mansour said.
Mansoor argued that the real motivation behind these suspensions and assumption letters was the “unfortunate large casino lobby” about Karshi’s sports trading contract.
On Tuesday, Calci notched its first legal victory in a lawsuit against Nevada. A federal judge ruled that Calci could continue working in Nevada, at least until the lawsuit is resolved.
The forecast market is a relatively new financial product. In other words, it is somewhat unclear which laws apply to them and which laws do not. Karshi seems to make the most of ambiguity, allowing users to bet on everything under the sun.
Nevertheless, Calci’s legal battle should make some clarity about the scope of the forecast market.
Trump’s Bond
Kalshi’s forecast market, and others like that, have shown that Trump will win 2024 US Presidential Election Day before Election Night, despite other polls suggesting that it is not. In the next few months, Calci’s relationship with the Trump administration grew stronger.
“(Calsi) was the only source of truth people had about the fact that Donald Trump was actually 63% likely to win the US election,” Mansour said.
In January, Karshi brought the president’s son, Donald Trump Jr., as his strategic adviser. In February, President Trump appointed former Karshi board members to lead the CFTC. And in March, Karshi’s top lawyer left the company and worked with Elon Musk’s Doge Group for the Securities and Exchange Commission.
On the stage, Mansoor downplayed his reliance on the Trump administration, but praised him for being a “pro-sponsor” in the financial services sector.
Gambling and predictions
The key question of Karshi’s legal battle is whether the forecast market is merely a gamble. While state regulators seem to think so, Mansoor claims he’s not, he told TechCrunch on stage.
According to Mansour, gambling involves creating and betting on artificial risks. For example, roll a die or bet money on the number that comes out.
Instead, the CEO of Kalshi argues that the forecast market is similar to the exchange of derivatives, with some risk, but ultimately helps participants to “price” the “price” or understand the risk of a particular asset or event. Derivative exchanges provide unique information and are given special status.
As an example of Kalshi’s economic utility, Mansour pointed to the forecast market for banning Tiktok.
“The ban on Tiktok is something you could not set a price before,” Mansour said. “It’s very important that there was no measurement of what would happen, and that’s why I really like this market.”
Of course, making these arguments would benefit Mansoor. Kalshi was last valued at $787 million, according to Pitchbook data. However, if Calci can secure its position in the world of sports betting, the startup’s rating could skyrocket even more.
Check out the full interview here.