Sports betting remains illegal in many U.S. states, but platforms like Kalshi are bypassing those restrictions by offering “prediction markets”—a financial product that mimics gambling without technically being classified as such.
Ian White, a special education paraprofessional in Minnesota—where online sports betting is banned—regularly wagers on NFL games through Kalshi. He found the platform on TikTok and now trades $10 contracts, having earned about $130 so far.
“I do consider Kalshi betting,” he said, “but I love how they get around it by selling futures.”
Betting in Disguise
Unlike sportsbooks such as FanDuel or DraftKings—both prohibited in 20 states—Kalshi operates in all 50. It avoids gambling classifications by presenting its wagers as financial contracts, regulated federally by the Commodity Futures Trading Commission (CFTC).
While traditional sportsbooks take bets against the house and profit from player losses, Kalshi facilitates trades between users and takes a service fee. “Kalshi doesn’t win when our customers lose,” said CEO Tarek Mansour. “Which creates a fair, transparent environment for people to trade.”
The business model has helped Kalshi grow quickly. In September, users traded over $2.5 billion in sports-related contracts—still small compared to the $14 billion accepted by licensed sportsbooks but gaining momentum fast.
Legal Gray Zone Draws Criticism
Kalshi’s rapid rise is triggering backlash in both gambling-restricted and gambling-friendly states. Lawmakers argue it’s simply rebranding sports betting to sidestep regulation and avoid taxes.
“What they’re doing is essentially calling sports betting by another name, and that’s just wrong,” said Senator Catherine Cortez Masto of Nevada.
States like New York collect billions from taxing sportsbook revenue, but prediction markets like Kalshi pay no state gambling tax. Massachusetts recently sued Kalshi, alleging it “disguises” gambling as financial trading and bypasses licensing rules that apply to sportsbooks.
Seven states—including Nevada, Illinois, and New Jersey—have issued cease-and-desist letters, but Kalshi continues operating nationwide. “The CFTC’s continued inaction is disappointing, to say the least,” said Illinois Gaming Board administrator Marcus Fruchter.
Politics and the Future of Prediction Markets
Kalshi’s legal standing improved dramatically after Donald Trump Jr. became a strategic adviser in January. Days after his father took office, Kalshi launched its first sports contracts tied toNFL playoff games. The CFTC, now led by Trump-appointed acting chairwoman Caroline Pham, has since dropped previous legal challenges.
The company is also benefiting from a partnership with Robinhood, letting users trade prediction contracts alongside stocks. Kalshi has even started offering more complex wagers like parlays, drawing comparisons to traditional sportsbooks and prompting concerns about addictive gambling.
Other platforms are following similar paths. Betr, a social sportsbook launched by Jake Paul, uses sweepstakes loopholes to operate in restricted states. Polymarket, another prediction market, is reentering the U.S. after resolving a $1.4 million fine from the CFTC It recently received a $2 billion investment from Intercontinental Exchange, valuing it at $8 billion.
Even FanDuel has announced plans to launch a prediction market of its own—suggesting sportsbooks may soon adopt the same legal strategies to expand.
Source: “Is Sports Betting Illegal in Your State? Not if You Call It a ‘Prediction Market’”, nytimes.com, October 5, 2025
The post How Prediction Markets Like Kalshi Are Dodging Sports Betting Bans first appeared on RealMoneyAction.com.