The New York Times asked a series of questions, then ignored almost every answer that didn’t align with the narrative that was being pushed. So we’re sharing the answers below.
Twenty states are engaged in active litigation with Kalshi and/or other prediction markets. Forty-four signed a letter to the CFTC last month arguing that prediction markets have evaded state regulations and failed to pay state taxes.
Federally regulated companies are subject to state taxes - we have never said otherwise. This is how almost all industries in America operate.
Telecom, energy, insurance, financial services and banking, aviation — all of these industries are exclusively regulated at the federal level and also pay state taxes. There is nothing out of the ordinary about this structure.
The states argue that Kalshi’s product is virtually indistinguishable from traditional sports betting, and that Kalshi lacks safeguards required under state gambling laws.
It’s flat-out wrong to say that Kalshi is “indistinguishable from traditional sports betting.” Ask a sportsbook customer how they post a bid or an ask, submit an immediate-or-cancel order, or check the orderbook. Or ask a sportsbook regulator how they protect against frontrunning, spoofing, or price manipulation. They don’t, and they don’t. It’s a different product.
Still, like any financial trading, there are risks. So Kalshi has all the safeguards you’d expect. We offer a variety of risk management tools, including trading breaks, self-exclusion, and deposit limits - all at the national level. As a federally regulated exchange, we also place accountability limits on each market. And we partner with the NCPG and firms like Birches Health to limit irresponsible trading, which is a real risk in any type of financial market with retail participants.
Most importantly, we have a national framework of regulation, not a state-by-state patchwork that enables self-excluded customers to cross state lines and open up another account.
If you want to get into the weeds, here’s more on exchanges compared to sportsbooks & casinos:
The exchange model and casino model are fundamentally different
Casinos are the counterparty, but exchanges are not.
Exchanges serve the purposes of the Commodity Exchange Act—price discovery, hedging, promotion of fair competition. Casinos do not.
The differences between casinos and exchanges require different regulation.
Casinos can be regulated state by state, but that is literally impossible for exchanges, which need a nationwide market to ensure liquidity, impartial access, accurate and competitive prices.
Casinos win when bettors lose. Casinos thus have obvious incentives to abuse their power to hurt their customers. For example, casinos lose money when bettors with accurate information trade, and therefore ban or severely limit those bettors. Many state regulations exist to protect bettors from abusive practices.
But exchanges do not have these incentives. Instead, the risks for exchanges are market risks—the risks of market manipulation, price distortions, unfair access. Those are the risks that federal regulation protects against. But states have no ability or experience to protect against those risks.
History overwhelmingly shows that Congress intended to preempt states from applying their gambling laws to on-DCM trading
Some say that sports-event contracts resemble gambling and that Congress would not have intended to preempt state gambling laws. This view is profoundly ahistorical.
In the late-19th and early 20th century, dozens of states sought to apply their gambling laws to classic derivatives trading. States called derivatives trading “gambling in grain” because the underlying commodity never changed hands, and contracts were cash-settled.
These cases were not a secret. Many of them even made their way all the way to the U.S. Supreme Court. At the time, federal law did not preempt state law, so the Supreme Court held that states could apply state gambling laws to prohibit gambling in futures markets.
This is really important. It refutes the idea that derivatives trading is something that states wouldn’t try to regulate as gambling. Instead, the boundary between gambling that states may regulate and derivatives transactions has been an issue for as long as the derivatives markets have existed in this country.
There is overwhelming evidence that when Congress created the CFTC and gave it exclusive jurisdiction 1974, it intended to preempt states from applying their gambling laws to derivatives trading.
In light of the CFTC’s exclusive jurisdiction, it would be absurd to hold that states today could ban trading in corn futures as a type of gambling.
But if states are free to apply their gambling laws to ban sports-event contracts, there is literally nothing to stop them from applying those same laws to ban corn or pork-belly futures—a power that everyone agrees states lack.
This is an insurmountable problem for those who claim states should be permitted to regulate sports event contracts. They simply cannot explain how that argument would not also allow states to regulate all derivatives trading as unlawful gambling.
We asked the nonpartisan Tax Foundation to estimate how much prediction markets would pay in state taxes if they were taxed like sports books. The group estimates that such a tax would generate at least $2 billion in annual revenue for states.
Hard to comment without seeing the underlying assumptions and timeframe of the analysis. For North Carolina, online sports books generated ~$130M of tax revenue in 2025, so this figure seems materially higher (15x).
We spoke with Derek Brown in Utah. He said that on the morning of the Super Bowl, he saw a Kalshi ad pop up on his college-age son’s phone and that it encouraged him to start “trading in football futures.” Mr. Brown said he was appalled by this, because he felt that Kalshi was using some clever wording to get around gambling restrictions in Utah.
As described above, there’s a fundamental difference in the product. Gaming companies have business models that rely on hooking losers and banning winners - every dollar a customer loses goes towards their bottom line. Different laws apply to exchanges because they don’t have that predatory incentive.
Mr. Trump addressed a crowd of Republican attorneys general at RAGA’s winter retreat in New Orleans in March 2026. Onstage, he made the case to the Republican AGs that prediction markets are different from sports betting and are the province of the CFTC rather than state officials. He said prediction markets were like “any other derivative.” And he suggested that state leaders were being led astray by a “vested interest” – gambling companies that wanted to preserve their monopolies.
He’s a fan of the industry and has his own views. He provides advice on marketing strategy, but he does not advise on regulatory matters.
The recently approved North Carolina state budget contained a provision granting prediction markets like Kalshi the ability to operate in the state, as long as they have registered with the CFTC. They would be required to pay a 6 percent tax.
Jim Harrell, a lobbyist for Kalshi, helped shape the budget language in discussions with the House’s Republican leadership. Kalshi’s feedback influenced the final draft of the provision, resulting in a lower tax rate than what the North Carolina legislators initially proposed.
This is literally what lobbyists do - represent client interests and help inform legislators regarding potential legislation. Prediction markets and sportsbooks have very different revenue structures, so the state enacted a percentage that contributes roughly the same in tax revenue to the state as sportsbooks.
Put another way:
Unlike sportsbooks, prediction markets do not ban winners. So users win on prediction markets, and those winnings are taxed at both the federal and state level. Plus the transaction fees prediction markets make are also taxed. Sportsbooks’ margins are 10x more than those of prediction markets, so you can’t compare tax rates, because you’re taxing different amounts. So the focus should be less on the tax percentage number and more on the actual revenue directed to the state.
Democrats in North Carolina have expressed outrage about the budget language, pointing out that prediction markets will be taxed at 6 percent while sports books will be taxed at 23 percent.
Despite a difference in headline tax rates, prediction markets will generate tax contributions for the state of North Carolina that are slightly greater than those of sports books when accounting for taxable capital gains generated by traders.
The budget passed with bipartisan support
Prediction Markets are fundamentally different business models than sports books as CFTC-regulated designated contract markets (DCMs)
As outcome-neutral exchanges, Prediction Markets earn revenue from trading fees versus sports books that earn revenue from the collecting the stakes of losing bets and a fee built-in to the odds (the “vig” or “juice”)
Prediction Market gross fees are the same across all markets and are also publicly disclosed to users versus hidden within odds (this is a regulatory requirement from the CFTC to ensure equality and transparency across DCMs)
Due to this difference in business models Prediction Market trading fees are not comparable to sports book gross gaming revenue (GGR)
To illustrate this difference, the 2025 national hold for online sports books was 10.2% (Hold = GGR ÷ Total Wagers/Handle) vs. Prediction Markets have a blended fee of roughly 1.0% (Blended Fee = Trading Fees / Volume)
This represents 10.0x difference in take-rate between online sports books and Prediction Markets
However, the benefit of Prediction Markets as outcome-neutral exchanges is that each event contract has a winner and the winnings produce taxable capital gains
When accounting for the taxable capital gains of Prediction Market traders in North Carolina (based on 2026 YTD returns data), total tax contributions to the state of North Carolina will be in-line (actually slightly greater than) with market share compared to sports books (Market Share = Prediction Markets Trading Fee Revenue ÷(Prediction Markets Trading Fee Revenue + Online Sports Book GGR))
We know you don’t speak for the CFTC. But former regulators and other experts have described the CFTC’s lawsuits against the states and the agency’s use of its emergency powers as an unprecedented and overly aggressive legal campaign to help prediction markets. What do you think of that line of criticism?
It’s unprecedented and overly aggressive for states to try to shut down a federally licensed exchange. It’s like if North Carolina wanted to shut down the stock market.
Our understanding is that the state litigation has yielded mixed results so far. Kalshi has won in some jurisdictions and lost in others. Kalshi won at the Second Circuit, for example, but is widely expected to lose at the Sixth Circuit and the Ninth Circuit. Do you agree with that characterization? Are there any other specific cases that we ought to highlight?
We won in the Third Circuit. And no, we do not agree with that characterization. The legal split is currently close to 50-50. The Third Circuit Court of Appeals (NJ, PA, DE) and courts in NJ, MN, TN, and AZ on one side; courts in NY, MA, NV, WI, UT, MI and CT on the other. Even the courts that rule against Kalshi do not all agree - many have different legal bases for their findings.
