The New Jersey Division of Gaming Enforcement (DGE) issued cease-and-desist-letters to predictions markets Kalshi and Robinhood on Thursday afternoon. These exchanges have become increasingly controversial in the US since getting the green light to begin offering contracts on sporting events, becoming an alternative to conventional sportsbooks in the process.
The two companies might not have gotten the same attention in New Jersey as elsewhere, because residents have long had access to legal sports betting and online casinos. Nonetheless, the Division of Gaming Enforcement now wants them out.
PlayNJ obtained a copy of both letters on Friday morning. The one to Kalshi reads:
“The Division has accessed your mobile application and website, located at www.kalshi.com, and it has determined that your company, Kalshi Inc. d/b/a KalshiEX LLC and/or Kalshi (“Kalshi”), is listing unauthorized sports wagers for individuals located within the State of New Jersey.
“This activity constitutes a violation of the New Jersey Sports Wagering Act, which only permits licensed entities to offer sports wagering to patrons located in New Jersey.”
Robinhood’s letter has the same wording, with the letter being addressed to them. New Jersey also has a strict rule that does not allow customers to wager on in-state schools and games that are played in the Garden State. For example, operators in New Jersey are prohibited from accepting bets on Sweet 16 and Elite 8 games that are played in Newark.
The DGE addressed that in its letter, too:
“Further, Kalshi is currently offering unauthorized sports wagering to New Jersey residents on collegiate sporting events occurring in New Jersey in violation of the New Jersey Constitution.”
Robinhood pulls out, Kalshi prepares for resolution
Both companies operate under the Commodity Futures Trading Commission (CFTC), which is legal in New Jersey. However, the DGE believes that both sites are offering “unauthorized sports wagers.”
Robinhood is already complying with the DGE, and leaving the state. The company said in a statement:
“Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner.
“While we do not believe these contracts run afoul of any state laws, we are no longer allowing New Jersey residents to enter new positions for the Men’s and Women’s Basketball Tournament event contracts.”
Kalshi did not say whether or not it is pulling out of New Jersey, yet. Rather, it wants to find a resolution. The company said:
“Kalshi believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission. We look forward to engaging with the state of New Jersey to resolve this matter.”
Both sites have until 11:59 p.m. Friday to take down all wagering activity, which must be communicated to the DGE in writing. The letters also states:
“Failure to comply with this directive will result in the Division taking further enforcement actions, which may include any measures available under New Jersey law. “
What are prediction markets?
Prediction markets can be applied to sports, but it is not your prototypical wager. On Kalshi, customers can place a prediction on a game or event, at a certain price, similar to the stock market. Players are able to trade their position before the event ends.
Robinhood offers similar markets, and partnered with Kalshi prior to the NCAA Tournament.
