With prediction markets dominating the news cycle, it came as no surprise that one of the Bet Bash panels would focus on that subject. Friday morning at Circa Las Vegas, two lawyers — one pro PMs, one against — hashed out some of the legalities and how all this might settle up.
But at this conference specifically for sports bettors, many of them sharp, one attendee pointed out something that was lost in all the legal wrangling. “I can’t get a bet down with a sportsbook,” said the bettor, while requesting anonymity. “But with Kalshi or NoVig or whomever, at least I can get down.”
Will that continue to be the case? On that question, everyone agreed that the answer will come from the Supreme Court.
Prediction Predicament
Nicole Valente, special counsel for Milbank LLP in New York, is a litigation and arbitration attorney. She’s involved in prediction market litigation in several states/federal district court jurisdictions at the moment, representing Kalshi and others.
The issue that’s surfaced over the past 18 months or so is the offering of sports-related contracts in prediction markets. Valente and the companies she represents argue that such contracts are legal, operating under Commodity Futures Trading Commission regulations.
“What does the law say? Trading on Designated Contract Markets (DCMs) is within the exclusive jurisdiction of the CFTC,” Valente said.
Many state legislators and regulators disagree on that point. As do Native American tribes that have gaming operations. So attorney Lester Marston, who has represented tribal entities for 40 years, is on the same side as the states in this instance.
Marston argues against prediction markets on the premise that they’re ostensibly sports betting.
“They came up with a loophole,” Marston said of operators such as Kalshi and Polymarket. “[But] when I can take my cellphone and download the Kalshi app, and [trade] on whether [Jannik] Sinner is gonna win the U.S. Open, that’s making a bet.”
After those opening arguments, the debate between Valente and Marston — adeptly moderated by West Virginia legislator Shawn Fluharty — volleyed back-and-forth, with mentions of the Commerce Clause, the Indian Gaming Act, the CFTC’s role/authority, the Commodity Exchange Act and more.
It was an interesting and useful exchange. But also well in the legal weeds. All anyone in that room really wanted to know is how the issue will be settled.
Supreme Court Soon?
Kalshi has gotten some key court victories, and also taken key losses. And as Valente noted, there’s prediction market litigation in more than 20 states.
As much as Valente and Marston disagreed on pretty much any and all facets of sports prediction markets, at least the two came to the table on resolution during Friday’s panel.
“I think it would be surprising if the Supreme Court didn’t weigh in on this issue. All of these cases are bubbling up in federal courts and in state courts,” Valente said. “Eight of 11 federal [circuit] courts are already hearing these issues.”
“Given the breadth of the issues and the number of states [involved], and a lot of disagreements, it’s likely that the Supreme Court will take that.”
Added Marston: “I think what’ll happen is the Supreme Court will grant cert in the Nevada case.”
That would be the February lawsuit filed by the Nevada Gaming Control Board against Kalshi. The state initially got a temporary restraining order, and subsequently, in July, the NGCB and Kalshi reached an agreement to halt the company’s operation in Nevada.
It’s likely now just a matter of the timetable in which the Supreme Court takes up this issue.
“It’s gonna happen sooner rather than later,” Valente said. “It’ll be this term or the next term, in the next couple of years.”
Marston is counting on less than one year. “I’ll be in the U.S. Supreme Court come February next year,” he said, adding that he ultimately expects Congress to get involved, too. “In response to the Supreme Court decision, we’re going to get congressional legislation.”
