Kalshi Denies It’s a Sportsbook as World Cup Bets Surge

Prediction market platform Kalshi has processed approximately $40 billion in sports wagers during the 2026 World Cup — roughly 10 times the $4 billion analysts expect traditional sportsbooks like DraftKings and FanDuel to handle across all 104 matches, according to NPR. The explosive growth has intensified the debate over whether Kalshi is a legitimate financial exchange or an unlicensed sportsbook operating under a different name.

The Classification Question

Kalshi maintains it is not a sports betting site but a federally regulated financial product — a “designated contract market” under the oversight of the Commodity Futures Trading Commission (CFTC). Unlike traditional sportsbooks where bettors wager against “the house,” Kalshi operates as a peer-to-peer exchange where users trade event contracts with each other, charging a fee on each transaction rather than profiting from losing bets.

“Just like the stock market, you can exit your position at any time. It’s a fairer, less predatory platform,” Kalshi spokeswoman Elisabeth Diana told NPR.

But critics argue the distinction is semantic. Sports account for 80-90% of all bets placed on Kalshi and 89% of its 2025 revenue, according to Wikipedia. “From a bettor’s standpoint, Kalshi and sportsbooks are basically identical,” said Victor Matheson, an economics professor at the College of the Holy Cross who specializes in sports gambling. “I don’t see why they should be regulated and taxed any differently than sportsbooks.”

Tax Avoidance at Scale

The classification has enormous financial implications. Traditional sportsbooks pay approximately $4 billion per year in state gaming taxes, with rates ranging from 6.7% in Nevada to 51% in New York. Kalshi avoids these taxes entirely due to its status as a federally regulated exchange, as reported by Yahoo Finance.

These taxes fund critical public services. New York sports betting revenue supports public education, Colorado taxes fund water preservation programs, and Illinois uses sports gambling taxes for road and bridge construction. “Prediction markets circumventing state gambling taxes — even if, to a customer, the product is indistinguishable from sports betting — was bound to get a reaction from state governments that feel cheated,” said Danny Funt, author of “Everybody Loses: The Tumultuous Rise of American Sports Gambling.”

Kalshi’s classification also allows it to operate in states where sports betting remains illegal, such as California and Texas, and accept users as young as 18 instead of the 21-year-old minimum enforced by traditional sportsbooks. According to CBS Sports, Kalshi and Polymarket are “signing up customers in states where sports betting isn’t allowed, like California and Texas, and signing up 18-year-olds in states where the legal age to sports bet is 21. It’s broadly new money, money sportsbooks couldn’t touch,” said Brad Allen, an analyst at Eilers & Krejcik Gaming.

A Legal War Across 30 Fronts

The question of whether Kalshi is a sportsbook or a financial exchange is now at the center of more than 30 active lawsuits across the country, as documented by the Action Network.

The most significant ruling came on April 7, 2026, when the 3rd Circuit Court of Appeals ruled 2-1 that the CFTC has exclusive jurisdiction over Kalshi’s sports contracts. Judge David Porter wrote that “Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.” Judge Jane Richards Roth dissented sharply, calling Kalshi’s offerings “virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.”

At the trial court level, the results have been mixed. Kalshi has won rulings in D.C., New Jersey, California, and Tennessee, but lost in Maryland, Nevada, Massachusetts, and Ohio. Nevada remains the only state with an active, court-enforced ban, where a judge called sports betting and sports contract trading “indistinguishable.” Minnesota became the first state to pass a law banning prediction markets outright, effective August 1, though the CFTC has filed suit to block it.

In a dramatic escalation, the CFTC and Department of Justice sued Arizona, Connecticut, and Illinois on April 2 — the first time the federal government has sued states over prediction markets. CFTC Chair Michael S. Selig stated: “States cannot circumvent the clear directive of Congress… if you interfere with the operation of federal law in regulating financial markets, we will sue you.”

Political Dynamics and What’s Next

The Trump administration has been favorable to prediction markets. Donald Trump Jr. holds equity in both Kalshi and Polymarket and serves as an advisor to each company. President Trump has called state officials trying to regulate prediction markets “SCUM” and emphasized the importance of CFTC retaining “exclusive authority.”

However, the issue has drawn bipartisan concern. Senators Adam Schiff (D-CA) and John Curtis (R-UT) introduced the “Prediction Markets Are Gambling Act” in March 2026, which would ban CFTC-registered entities from listing sports contracts. The U.S. Senate also banned its members and staff from betting on prediction markets in May 2026.

Legal experts expect the issue to eventually reach the Supreme Court. If the 4th Circuit sides with Maryland in its upcoming May 2026 oral arguments, it would create a circuit split with the 3rd Circuit’s pro-Kalshi ruling, almost certainly triggering Supreme Court review. A ruling could affirm Kalshi’s novel legal designation or strike it down entirely.

“We spent four years working with the government to become federally regulated. We comply with all laws and are confident in our legal position,” Kalshi’s Diana said.

Meanwhile, Kalshi’s monthly betting volume has grown from approximately $5 billion in late 2025 to over $30 billion in June 2026. The company is now valued at $22 billion following a TCV-led funding round. As Kalshi CEO Tarek Mansour put it: “The long-term vision is to financialize everything and create a tradeable asset out of any difference in opinion.” Whether that vision survives the coming legal storm remains an open question.