In response to the Ohio Casino Control Commission’s (OCCC) March 31 cease-and-desist letter, at least one Ohio sports betting operator has asked gambling affiliates to stop promoting Kalshi, Robinhood, and Crypto.com, Prediction News has learned from an undisclosed source.
Ohio was the third state after Nevada and New Jersey to send cease and desists to prediction market platforms for offering contracts on sports events which circumvent state gaming laws and regulations.
As a state with some of the strictest regulations for gambling affiliates, Ohio’s entry into the fight against sports prediction markets could send ripple effects for any affiliates with who have or who have considered adding partnership deals with financial trading platforms.
Ohio throws gambling affiliates a curve ball
Ohio’s cease and desist letter argues that by definition, sports event contracts equate to sports betting. It further contends that because Kalshi lacks a sports gaming license, the company is operating as an illegal sportsbook. Nevada and New Jersey’s C&D letters included similar argumentation around Kalshi (and Robinhood in the NJ letter) offering what amounts to unregulated sports betting in violation of state law.
Kalshi has responded with lawsuits against New Jersey and Nevada, maintaining that its contracts are regulated by the CFTC and therefore pre-empt state law. The battle will play out in court over the next several months.
The OCCC’s arguments, whether they hold up in ongoing court battles or not, put certain gambling affiliates in a tough spot. That’s because Ohio has a stipulation in its gambling regulations that outlaws licensed gambling affiliates from promoting forms of illegal gambling. Rule 3775-16-08 states (emphasis added):
Affiliate marketers need not obtain a supplier license under rule 3775-4-08 of the Administrative Code solely as a result of their conduct as an affiliate marketer but must comply with all aspects of this rule and must not otherwise advertise forms of illegal gambling or gaming in Ohio. The commission may require a sports gaming proprietor to terminate an affiliate marketer contract if the affiliate marketer has violated Chapter 3775. of the Revised Code or the rules adopted thereunder.
Gambling operators walking a tightrope between opportunity and compliance
In addition to implications for gambling affiliates, gambling operators are also caught in the middle. In the past few months, the gaming industry has become increasingly interested in prediction markets and more specifically, sports event contracts. Depending how the battle for offering sports prediction markets plays out, a number of sports betting giants are jockeying to be in position to capitalize on offerings of their own.
DraftKings, for example, has registered to become a member of the National Futures Association (NFA) under a new entity called DraftKings Predict. And they aren’t the only ones eyeing the opportunity. After all, federally-regulated prediction markets would be an attractive way to avoid state regulations like high license fees and rising tax rates states impose on sports betting operators.
However, regulated gaming operators also recognize the risks of pursuing prediction markets too aggressively. Ohio’s stance and gambling affiliate rules are a reminder that violating gaming regulations in one state could put other state gaming licenses at risk, setting up a hard choice for gaming operators interested in offering prediction markets.
As Kalshi litigation (vs. the CFTC and the state regulators) continues unfolding, gambling affiliates and operators will be watching closely to ensure they land on the right side of what is determined to be legally compliant offerings.
