The New Jersey Division of Gaming Enforcement (NJDGE) has issued cease-and-desist orders to Kalshi and Robinhood, over alleged violations of state sports wagering laws.
The regulatory action, confirmed on Thursday (27 March) and first published by The Closing Line, accuses both platforms of offering sports betting products in New Jersey without the appropriate state-level authorisation.
According to the cease-and-desist letters, the NJDGE contends that by offering prediction markets on sporting events, both Kalshi and Robinhood are facilitating unauthorised sports wagering services in the state.
“The Division has accessed your mobile application and website, located at www.kalshi.com, and it has determined that your company … is listing unauthorised sports wagers for individuals located within the State of New Jersey,” one of the letters, sent to Kalshi, read.
“This activity constitutes a violation of the New Jersey Sports Wagering Act, which only permits licensed entities to offer sports wagering to patrons located in New Jersey.”
The regulator is demanding immediate compliance from both companies, including confirmation in writing by midnight on Friday 28 March that they have ceased all alleged sports wagering operations accessible to New Jersey residents.
The NJDGE further instructed the firms that all wagers placed by residents of New Jersey on their platforms be voided, which means those users should receive refunds.
The enforcement letter also specifically highlights an alleged violation of a New Jersey statute which prohibits bets on collegiate teams based in the state, or on college athletic events held within the state.
This provision is particularly relevant due to the ongoing East Regional round of the NCAA Men’s Basketball Tournament being held in Newark.
Previously, efforts have been made to expand college sports betting in the state, but none have yet been able to cross the finish line.
Betting vs. trading debate continues
Kalshi recently introduced sports-related markets, beginning with futures markets for high-profile events such as the Super Bowl and later expanding to include single-game betting-style markets for both the men’s and women’s NCAA basketball tournaments.
These markets, branded as “event contracts,” allow users to buy and sell positions based on the outcomes of specific sports events through an exchange model, rather than betting directly against a house.
Earlier this month, Kalshi partnered with Robinhood to integrate these contracts into the Robinhood online brokerage platform, marketing the partnership around the March Madness tournament.
Through this collaboration, Robinhood users were able to access Kalshi’s sports prediction markets, including bets on specific tournament games.
Kalshi operates under the oversight of the Commodity Futures Trading Commission (CFTC), the federal agency that governs derivatives and futures markets.
A spokesperson for Kalshi, in response to the NJDGE order, emphasised the company’s commitment to regulatory compliance, noting that the platform operates under comprehensive federal supervision.
The spokesperson added that Kalshi looks forward to engaging constructively with New Jersey officials to resolve the issue.
Sports prediction markets begin to falter
Despite its federal licensure, Kalshi’s offerings have raised regulatory concerns in multiple jurisdictions.
In addition to the New Jersey order, Kalshi has faced a similar cease-and-desist order in Nevada, although state officials there have not yet taken enforcement steps.
Moreover, Robinhood is currently under investigation by the Massachusetts Securities Division for potentially violating state securities laws in connection with its involvement in sports-related markets.
The introduction of these sports event contracts marks a growing intersection between financial markets and traditional sports betting, raising complex legal and regulatory questions.
While Kalshi and Robinhood maintain that their offerings are not sports betting in the conventional sense, some state gaming regulators appear unconvinced, citing existing statutes that regulate or prohibit such activity without licensure under state law.
This interpretation by the NJDGE seemingly supports those prior claims.
The gaming regulator has signaled potential legal action should either Kalshi or Robinhood fail to comply with the cease-and-desist directive by the stated deadline.
However, it has not indicated whether further investigations or enforcement actions are pending against other platforms or individuals connected with sports event trading products.