Kalshi and the prediction markets they offer (politics, sports, events, etc.) are available in all 50 states, but how is that possible?

You must first recognize that “Prediction Markets” are not betting; they are financial contracts, hence their cross-country availability.

A more direct legal explanation would be that Kalshi’s legal status in 50 states stems from its regulation by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM). A broader explanation and examples are covered below.

How Is It Legal In All 50 States?

Kalshi operates under the oversight of the CFTC, which regulates derivatives markets in the United States. Being designated as a DCM (Designated Contract Market) allows Kalshi to trade futures, swaps, and options on commodities, including event contracts, which are essentially derivatives based on the outcome of events rather than traditional commodities like oil or gold.

Once again, this regulatory status provides a legal framework for the platform to operate across the U.S., except where explicitly restricted by state law.

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To be eligible to open an account on Kalshi, you must:

  • Be 18 years or older.
  • Have a legal, U.S. residential address within the 50 states, D.C., or U.S. territories.
  • Have a bank account that can be linked to Kalshi.

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Event Contracts vs. Gambling:

Kalshi offers event contracts, which are different from gambling or sports betting in that they are considered financial instruments. These contracts allow users to trade on the outcome of events (like weather patterns, the Super Bowl, economic indicators, or political events) and are not classified as gambling under federal law because they serve as a form of hedging or speculation rather than games of chance. This distinction helps in avoiding issues with state gambling laws.

๐Ÿˆ Super Bowl Market Example

The current Super Bowl 59 market on Kalshi lists the KC Chiefs at 54% to win the game over the Eagles. This implied probability would be like taking the Chiefs on a -120 money line.

Kalshi Super Bowl Markets Example

Legal Battles and Court Decisions:

Kalshi faced regulatory challenges, particularly with contracts related to election outcomes. However, court decisions have influenced its legal operation. For instance, a ruling by Judge Jia Cobb and subsequent appeals court decisions have allowed Kalshi to offer these contracts, thereby reinforcing its legal standing to operate in most states by clarifying that such activities do not constitute unlawful gaming or gambling under federal law.

A potential legal battle could be brewing with sportsbook powerhouses like DraftKings and FanDuel. The core question for the gambling industry will be to fight what Kalshi is doing or simply create their own prediction markets platform.

User Base and Transparency:

Being regulated by the CFTC provides users with transparency, security, and trust, which are crucial for operating a financial exchange. This regulatory oversight ensures that Kalshi adheres to high standards of operation and accountability, which helps in establishing its legality across states.

The image below details the “order book” or contracts on the KC Chiefs to win Super Bowl 59 on Kalshi. Users can see the current contract volume and the prices that were entered. Buying a contract on the Chiefs at 54% would be the same as betting the money line at -120.

Kalshi KC Chiefs odds to win Super Bowl

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