Kalshi CEO Tarek Mansour says that if individual states take over the policing of US prediction markets, the markets themselves will leave.
His argument is simple. Squeeze the regulated players, and the demand does not disappear. It moves to offshore platforms that answer to no one.
The warning arrives as Kalshi fights legal battles on multiple fronts. Several states are trying to classify its sports-event contracts as illegal gambling, and the courts cannot agree on who is right.
A federal license meets 50 state rulebooks
Kalshi operates as a designated contract market under the Commodity Futures Trading Commission. Think of that as a federal exchange license, the same category of oversight that covers traditional futures venues.
The company’s position is that this federal oversight preempts state gambling laws. Put plainly, Kalshi argues the CFTC is the referee, so states do not get to call fouls on its sports contracts.
States see it differently. To them, a contract that pays out based on who wins a football game looks a lot like a sports bet, whatever the paperwork says.
The federal appeals courts have now split on the question. In 2026, the Third Circuit backed Kalshi’s preemption argument in a New Jersey case. The Ninth and Sixth Circuits went the other way, upholding states’ authority to enforce their gambling rules.
That split has real consequences. Nevada, Ohio, and Tennessee have been cleared to bring enforcement actions against Kalshi’s contracts.
The pressure is mounting. By late August 2026, at least four states, Nevada, Massachusetts, Michigan, and Washington, had secured court orders restricting what Kalshi can do. The company is now litigating in approximately 20 states, and it has Coinbase in its corner for some of those challenges.
The offshore argument, made under oath
Kalshi has been making the offshore case in front of lawmakers, not just in press interviews. During a Texas Senate hearing in September 2026, the company’s legal counsel Robert DeNault told legislators that banning federally regulated prediction markets would backfire.
His point was that bettors would not stop betting. They would simply migrate to unregulated offshore operations that offer none of the consumer protections Kalshi says it provides.
Mansour has leaned into the contrast with offshore competitors. In a September 24, 2026 PBS interview, he pointed to markets Kalshi has voluntarily refused to list. Those include contracts tied to war, assassinations, death, insider trading, and members of Congress.
He has also said Kalshi is willing to accept additional regulation. That is an unusual pitch from a company in litigation with roughly 20 states: please regulate us more, just do it at the federal level.
Sports are the business, and the business is shrinking
The fight matters so much to Kalshi because sports have been the engine of its revenue. In 2025, sports contracts accounted for about 95% of the company’s revenue.
By mid-2026, that share had fallen to roughly two-thirds. The research behind this story attributes the decline to the shifting legal environment.
The drop shows that the court orders are not abstract. They are showing up in the revenue mix.
What this means for prediction markets and crypto
With the Third Circuit on one side and the Ninth and Sixth on the other, the industry is operating under two incompatible legal maps.
For the crypto industry, the Coinbase involvement is the tell. Coinbase joining Kalshi’s challenges suggests the exchange sees the outcome as relevant to its own ambitions in event-based trading. A ruling that lets states override federally regulated contracts could shape how crypto firms approach similar products.
Kalshi’s core claim is that pushing activity offshore trades a supervised market for an unsupervised one. If that happens, users lose safeguards like the market restrictions Mansour described, and regulators lose visibility into the activity entirely.
States are not likely to find that argument decisive on its own. Their concern is that sports-event contracts are gambling by another name, and gambling has long been a matter of state law. Both sides believe they are protecting consumers. They simply disagree on which regulator should do it.
Watch for further circuit rulings, any resolution of the split between the appeals courts, and new state orders on top of the four already in place. Also watch whether Kalshi’s sports revenue share keeps sliding from roughly two-thirds.
Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.