Kalshi COO Says Casino-Style Gambling Has No Business At Prediction Markets

For anyone wondering where Kalshi draws the line when it comes to flat-out gambling, a letter to the Commodity Futures Trading Commission (CFTC) penned by co-founder and COO Luana Lopes Lara lays it out.

And her stated position is simple and direct: no casino-style gambling.

The letter was posted to the CFTC’s public comments page as the regulatory body prepares to pen new rules for the prediction market space.

“The Commission should build on this strong foundation by providing clear guidance that supports a broad range of event contracts on regulated exchanges, drawing firm lines where appropriate — around terrorism, assassination, war, and casino-style gaming — while ensuring that the universe of event contracts can continue to be listed, traded, and overseen by the Commission,” Lopes wrote by way of introduction.

But she wasn’t done. 

Later in the letter, she noted that Kalshi “refrains from listing contracts based upon casino-style games, such as roulette, slot machines, and other ‘table games.’”

She later got explicit in her description of how sports betting is not gaming, but casino is. There were some linguistic gymnastics on display here.

“At the time of Dodd-Frank’s enactment, wagering on sporting events was generally prevented by the Professional and Amateur Sports Protection Act of 1992, and was prohibited or tightly regulated by most states. Gaming therefore fit the unifying ‘unlawfulness’ principle of the list,” she wrote. “Still, rather than outright prohibit contracts based on ‘gaming,’ Congress tasked the CFTC with public interest review and discretion over their listing. That grant of discretion allows for flexibility as laws and public opinions shift over time. As we know, the legal landscape has shifted substantially since. The Supreme Court’s decision in Murphy v. NCAA, 138 S. Ct. 1461 (2018), invalidated PASPA on anti-commandeering grounds, and a majority of states have since legalized and regulated sports wagering. Casinos have also proliferated across the country in the interim years. Thus, the Commission’s interpretation of ‘gaming’ in section 5c(c)(5)(C) and the related public interest determination should be informed by that evolution, and should track the contemporary core meaning of ‘gaming’ in federal and state law: the operation of casino-style games of pure chance (such as roulette wheels, lotteries, and slot machines) whose outcomes are determined solely and purely by chance or by the structure of the game itself.”

Finally, she specifically asks for the CFTC to write a rule to define “gaming,” stating that “gaming should be defined narrowly to refer to the operation of casino-style games of pure chance (casino games, lotteries, slot machines, and similar activities).”

As Kalshi goes …

Obviously, Kalshi is but one operator in the prediction market space, and just because it doesn’t want — or plan — to offer online casino games doesn’t mean others wouldn’t.

To that end, InGame’s Daniel O’Boyle, a journalist largely focused for the past year on the prediction market space, thinks prediction markets offering casino games in the near future is possible, though unlikely.

O’Boyle, asked last week on the Low Rollers podcast to handicap the chances of a prediction market operator launching casino-style contracts within the next year, priced it at somewhere between 5 and 10 cents.

“I do think it’s unlikely,” he said. “If you follow prediction markets’ legal arguments, it’s pretty clear that if you take them all to be true, then they would be able to offer casino games. So maybe someone comes along and does it.”

The legal pathway is there. It’s just narrow and a little weird.

O’Boyle pointed to the same statutory language Lopes Lara leaned on in her CFTC letter, namely, the prohibition on “gaming” contracts, and noted Kalshi’s two-track argument: Casino counts as gaming, sports doesn’t, and anyway, the rule isn’t really a prohibition so much as a public-interest review. 

Then there’s the “swaps” definition under the Commodity Exchange Act, which requires a contract to have some kind of commercial, financial, or economic consequence. That sounds like a meaningful guardrail until you start poking at it.

“In theory, if there’s a roulette table where people are also playing the game in person and you just stream it, you could say, well, there’s a financial consequence for the people involved,” O’Boyle said. “You could probably not even do it based on a roulette wheel, but say, the digit after the decimal point in the S&P 500, and it’s just complete randomness.”

So who actually does it, if anyone does?

“If someone does it, it will probably be some random upstart exchange, or maybe someone like Gemini, a crypto business that offered some prediction market contracts,” O’Boyle said. “Nobody’s really using them, and maybe they decide, ‘What if we give it a go on casino? Nobody’s doing it yet. It could make a ton of money, because we can offer it in so many states where online casino isn’t legal now.'”

The financial logic is obvious. Online casino is legal in just eight states (one of which, Maine, has not launched yet). A prediction-market-flavored end-around could, on paper, open up a market of more than 200 million adults overnight.

But O’Boyle still doesn’t think it happens, and the reason has less to do with casino and more to do with sports.

“The CFTC has more clear power to block casino prediction market contracts if they want to block it,” he said. “And I think they probably would want to block it, in the hope that that would then keep the sports stuff feeling a little bit more secure.”

Sports prediction contracts are the goose laying the golden eggs right now for Kalshi, for Polymarket, and for the broader argument that the CFTC has carved out a legitimate, federally regulated alternative to the state-by-state sportsbook patchwork.

Casino contracts could put all of that at risk, and it would appear the CFTC, even under the current friendly administration, has every incentive to keep the line drawn exactly where Lopes Lara drew it in her letter.