• Kalshi and Robinhood sent cease-and-desist letters by DGE
• The regulator demands the platforms discontinue and void wagers
• Kalshi subtly notes that it is regulated under the CFTC, not gambling watchdogs

Regulation continues to challenge the world of prediction markets, as New Jersey becomes the latest state to intervene. The Division of Gaming Enforcement (DGE) has issued cease-and-desist letters to Kalshi and Robinhood, questioning the legality of their future contracts model.

DGE goes after Kalshi and Robinhood

This comes on the wake of Robinhood and Kalshi teaming up for March Madness prediction markets, which have already generated significant trading volume, accounting for at least 8% of the total predicted "betting volume" suggested by the American Gaming Association earlier in March.

The news was confirmed by The Closing Line on Thursday, with the DGE asking the companies to void any selections placed by New Jersey residents.

The letter sent to Kalshi alleges that the platform is violating state law, specifically the law that prohibits wagers to be placed on college teams that hail from the Garden State or on events that are taking place in the state.

The regulator has demanded confirmation in writing from both platforms by midnight on Friday, March 28, that they have stopped offering sports workers in the state. The DGE said that it was prepared to take legal action against the platforms if they did not comply with the order, despite the short notice.

A Kalshi spokesperson tersely responded to the regulation, without providing too much detail.

"Kalshi believes in the value of regulation and operates under the comprehensive oversight of the Commodity Futures Trading Commission. We look forward to engaging with the state of New Jersey to resolve this matter," the spokesperson said.

The legality of prediction markets was brought into focus again

Notably, Kalshi is arguing that it operates under the mandate of the Commodity Futures Trading Commission (CFTC), and it has indeed proven this to be the case in several high-profile clashes with both the regulator and gambling regulators.

However, the newly-announced partnership between the platform and Robinhood, a stock trading platform targeting millenials, may have ruffled feathers. The introduction of sports event trading is a yet unexplored market, but it is already generating significant excitement and has proven to be tempting for customers.

DraftKings, a notable sportsbook and gaming major, has criticized the sector but has similarly applied for a license to pursue a prediction market operation.