As first presented by The Closing Line, the OCCC alleges in its order that the platforms are operating illegally in the state by offering or facilitating markets that resemble sports betting, which is tightly regulated under Ohio law.

According to an accompanying statement from OCCC executive director Matthew Schuler, the companies’ sports event contracts are functionally equivalent to traditional sports wagers.

The distinction, he said, lies not in the mechanics of the offerings but in their regulatory oversight.

He emphasised that contracts offered by the platforms do not carry the consumer protections mandated under Ohio’s sports gaming laws, and are accessible to individuals under 21 years of age, which is below the legal threshold for sports betting in the state.

The cease-and-desist notices demand that the companies immediately halt all activities related to sports event contracts in Ohio and provide written confirmation of compliance by 14 April.

This directive follows growing scrutiny of the relatively new practice of offering sports-related futures contracts, which allow users to profit based on the outcomes of specific events like the results of games or player performances.

Kalshi has publicly pushed back against Ohio’s enforcement action. In a statement, the company argued that the state’s move challenges not only the legitimacy of its operations but also the authority of the CFTC itself.

Kalshi maintains that its offerings are legal, innovative financial instruments, not gambling products, and said it is prepared to defend its model in court.

The company also emphasised that prediction markets represent a meaningful innovation in financial technology.

Pioneers in the gaming space

Kalshi has described itself as a pioneer in the field and has already initiated legal action in Nevada and New Jersey in response to similar enforcement measures.

It contends that such state-level crackdowns could violate federal guidelines requiring fair and open access to commodities markets under CFTC jurisdiction.

The developments in Ohio mark the fourth state-level regulatory challenge against these platforms, following earlier enforcement efforts in Nevada, Michigan, and New Jersey.

In those states, regulators have similarly questioned whether offering futures on sporting events constitutes unauthorised sports betting rather than lawful commodities trading.

As more states evaluate the legality of sports-related futures contracts, there is growing concern among stakeholders in the traditional sports betting and tribal gaming industries.

Tribes, in particular, have long maintained sovereign control over gaming within their territories and often enjoy exclusivity agreements with states.

The emergence of financial platforms offering sports event contracts could be perceived as a threat to these arrangements, potentially leading to legal disputes over jurisdiction and regulatory authority.

Long legal battle ahead

A favourable court ruling for Kalshi or a definitive endorsement from the CFTC could disrupt the existing landscape of sports betting regulation.

Such a decision might open the door to new forms of market-based speculation on sports outcomes, bypassing the licensing requirements and consumer protections that states currently enforce.

The case also raises broader questions about the evolving nature of financial markets and their intersection with gaming law.

While event-based futures contracts have long been used in contexts like elections, economic indicators, and weather, their extension into the realm of sports introduces novel legal and ethical considerations.

The core issue remains whether these contracts should be treated as financial instruments governed by federal commodities law or as gambling products subject to state regulation.

Until the matter is resolved by courts or federal regulators, the companies face increasing legal challenges at the state level and a prolonged clash between financial innovation and traditional gaming regulation.