Kalshi Counterattacks New York State's 'Gambling' Lawsuit... "If the same logic applies, Nasdaq should also be shut down"

▲ New York, prediction market, lawsuit/AI generated image

New York State has filed a lawsuit classifying the prediction market platform Kalshi as a gambling operator. In response, Kalshi countered that this action is an offensive by existing industries seeking to curb a rapidly growing new industry, rather than to protect users.

Tarek Mansour, co-founder and CEO of Kalshi, claimed in an interview with CNBC on August 3 (local time) that New York State's lawsuit is not limited to sports products but targets the entire prediction market business model. New York State determined that the structure where Kalshi users bet money on the outcome of games or future events beyond their control and receive compensation is essentially gambling. CNBC stated that it has a commercial relationship with Kalshi, including customer acquisition and minority equity investments.

Mansour argued that as the prediction market grows rapidly and threatens the existing sports betting industry, regulations and lawsuits are intensifying. He referenced the clashes between the taxi industry and Uber, and the hotel industry and Airbnb, stating, “Existing industries first sue, then attempt legislation, and if consumer demand does not disappear, they engage in competition and innovation.” Kalshi maintains that it is supervised by federal regulatory agencies and complies with licenses obtained over several years and related regulations.

Kalshi announced that it has secured over 1 million users, and New York users have earned a total of over $200 million this year. Mansour compared this to the fact that sports betting users had a net loss of around $200 million during the same period. He emphasized, “In sportsbooks and casinos, the operator always wins, so it's impossible for all users to earn $200 million,” stressing that the prediction market has a different structure from gambling where money is bet against the operator.

Kalshi also proposed a taxation plan for prediction markets to New York State. Mansour claimed that this plan could secure approximately $10 billion in tax revenue over the next five years. Kalshi explained that instead of taking user losses as profit like sports betting companies, it charges a 1% fee on the transaction amount. The logic is that by taxing the profits earned by prediction market users, significant finances can be raised without relying on consumer losses.

Mansour stated that Kalshi is willing to accept additional regulations if there are gaps in user protection by New York State, but has not received any specific response to the taxation proposal. He identified the existing sports betting industry as the real beneficiary of the lawsuit, saying, “New York State should choose New Yorkers over special interests.” Kalshi's final position is that if New York State's legal principle applies not only to sports events but to all event contracts, it would be difficult to establish a clear boundary between speculative trading in financial markets and prediction markets.

[Article Key Summary]

-New York State filed a lawsuit, classifying Kalshi's prediction market business as inherent gambling.

-Kalshi countered that New York users earned over $200 million this year, arguing that its structure differs from sports betting where the operator always wins.

-Kalshi proposed a taxation plan that could secure approximately $10 billion in tax revenue over the next five years but stated it has not received a response from New York State.

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