In a high-profile move underscoring mounting tensions between fintech innovation and state oversight, the Ohio Casino Control Commission (OCCC) has issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com. The orders effectively halt their sports prediction markets within the state. The OCCC’s action reflects growing national concern about how they should regulate these event-based financial contracts, often built on blockchain structure or marketed via crypto-native platforms.
Regulators Say: It’s Gambling, Not Innovation
The Commission’s Executive Director, Matthew Schuler, stated that the products offered on the platforms were “akin to sports betting,” which falls under Ohio’s legal gambling framework. Regulators pointed to concerns about underage participation, lack of consumer protections, and insufficient transparency. They argue the platforms did not meet the standard imposed on licensed sportsbooks operating legally within Ohio.
“Purchasing a contract based on which team a person thinks will win a sporting event is no different than placing a bet through a traditional sportsbook,” Schuler wrote.
>>> Read more: Robinhood Bets Big On Prediction Markets for Retail Trading
Kalshi Pushes Back: A Federally Regulated Exchange
Kalshi, a federally registered Designated Contract Market (DCM) overseen by the Commodity Futures Trading Commission (CFTC), contests that view. It maintains that its event contracts, including those tied to sports outcomes, are legitimate financial products governed by federal law. However, the OCCC and other state regulators see such contracts as gambling under state statutes, regardless of federal registration.
Ohio is the latest state to act, joining New Jersey, Nevada, and Massachusetts. Those states recently took steps to prohibit Kalshi and similar platforms from offering prediction markets linked to sports results. Kalshi has already initiated legal action against regulators in New Jersey and Nevada, setting the stage for a broader jurisdictional showdown between federal and state authorities.
Sports Leagues Warn of Integrity Threats
Meanwhile, Major League Baseball (MLB) has voiced its own concerns. In a letter to the CFTC last year, MLB warned that sports prediction markets, especially those not subject to established integrity protocols, could threaten the fairness and perception of sports competitions. The league argued that these platforms do not share real-time information, leaving sports organizations without tools to detect suspicious activity.
Robinhood and Crypto.com Also Targeted
Robinhood and Crypto.com, both of which have expanded into crypto-forward prediction market offerings, are also under scrutiny. The cease-and-desist letters did not detail their specific products. Nevertheless, their inclusion signals Ohio’s intent to draw a hard regulatory line as fintech and crypto platforms continue to blur boundaries between financial speculation and gambling.
>>> Read more: Robinhood Investigated for NCAA Event-Based Contract Feature
Innovation Meets the Limits of State Law
Prediction markets have gained popularity recently as novel instruments within decentralized finance (DeFi) and retail trading communities. Platforms like Kalshi pitch themselves as democratizing tools for public forecasting and hedging. They offer users the chance to trade on everything from political outcomes to economic indicators. However, the inclusion of sports outcomes, particularly those accessible to retail users, appears to have pushed state regulators into action.
The Bigger Picture: A Regulatory Crossroads
The regulatory uncertainty surrounding prediction markets underscores a growing gap between innovation and compliance. Platforms argue they are creating new asset classes akin to options or futures. States, on the other hand, are increasingly treating them as unlicensed gambling operations, especially when tied to sports.
For now, Ohio’s decision raises fundamental questions for the fintech and crypto sectors: Can they safely offer blockchain-based or CFTC-regulated event contracts without violating state laws? Or will the legacy frameworks designed to govern brick-and-mortar sportsbooks constrain innovation in this space?
As legal challenges unfold and regulatory boundaries are tested, the outcome will have significant implications for how DeFi intersects with consumer protection. Can prediction markets mature into mainstream financial instruments – or will they remain confined to legal grey zones?
Readers’ frequently asked questions
What exactly is a prediction market and how does it work on platforms like Kalshi?
A prediction market is a type of exchange where users can trade contracts whose value is tied to the outcome of future events. On platforms like Kalshi, these contracts function similarly to financial derivatives. For example, you might buy a contract that pays out if a specific sports team wins a match. If the event occurs as predicted, the contract pays $1; if not, it pays $0. The price of the contract before the event reflects the market’s collective belief in the likelihood of that outcome. E.g. $0.65 implies a 65% chance. Kalshi operates these markets under federal approval from the Commodity Futures Trading Commission (CFTC). When applied to sports outcomes, these contracts closely resemble bets, which is why state regulators are stepping in.
Why is there a conflict between state and federal regulators over these platforms?
The conflict arises from how different authorities define and regulate these products. Kalshi and similar platforms argue that their markets are federally regulated financial instruments, much like futures contracts. They have received approval from the CFTC, which governs derivatives markets in the U.S. However, states like Ohio classify any contract based on the outcome of a sports event as a form of gambling, which requires a state license. This leads to a legal grey area. A platform can comply with federal law but is still considered illegal at the state level. That’s why Kalshi faces legal challenges in multiple states, despite federal approval.
Can I still use these platforms if I live in Ohio or another state that banned them?
The affected platforms are legally required to block access to their sports prediction markets for users physically located in a state that issued a cease-and-desist order like Ohio did. This typically means using geolocation tools to restrict participation. If you try to access the service from a banned state, you may either be blocked entirely from the platform or only restricted from trading specific contracts, such as those tied to sports events. Attempting to bypass these restrictions could violate state laws. It’s important to check whether a platform is authorized to operate prediction markets in your state before using it, especially if it involves real money.
What Is In It For You? Action Items You Might Want to Consider
Monitor State-Level Regulations Closely – Especially If You’re Trading Event Contracts
If you’re dabbling in prediction markets or event-based trading, now’s the time to pay attention to your state’s stance. Even platforms with federal clearance, like Kalshi, can face shutdowns at the state level. This means access to specific contracts, or the entire platform, could disappear overnight depending on where you live. Consider using platforms that are fully transparent about their regulatory status in your jurisdiction.
Reassess Exposure to Sports-Linked Products on Crypto Platforms
With Robinhood and Crypto.com being targeted for sports prediction activities, it’s worth reviewing any positions or experimental features you’ve used tied to sports outcomes. Even if they’re marketed as “event contracts,” regulators are now scrutinizing them as gambling. You might want to pause activity in this category until there’s more legal clarity; or stick to financial or political markets that haven’t yet triggered the same level of enforcement
Watch for Market Signals on Regulatory Crackdowns
This Ohio move could be a bellwether. If more states follow, platforms may pull back or reconfigure offerings, which could affect liquidity, volatility, and user access. Traders who stay ahead of these shifts by tracking legal actions and platform announcements will have a better edge in adjusting strategy or pivoting to compliant DeFi alternatives where available
