Kalshi’s $22 Billion Round Hands Sweepstakes Operators a Spring Reprieve

A record fundraising round, an executive sentiment shock at the country’s largest gambling trade group, and a letter from 41 state attorneys general landed within eight days. For sweepstakes operators, the eight days passed without a serious mention. That, in itself, is news.

Key takeaways

• Kalshi raised $1 billion at a $22 billion valuation on May 7, double its valuation from five months earlier. The round was led by Coatue Management, with Sequoia Capital, Andreessen Horowitz, Paradigm, IVP, Morgan Stanley and ARK Invest joining.
  
• The same week, the American Gaming Association (AGA) reported that 81 percent of senior gaming executives now consider prediction markets a “very significant” threat to the regulated gambling industry. It was the leading risk identified in the AGA‘s latest sentiment survey.
  
• A bipartisan coalition of 41 state attorneys general filed a letter on May 8, urging the Commodity Futures Trading Commission to drop its claim that sports event contracts are subject to exclusive federal jurisdiction. The letter is the broadest state-level pushback the CFTC has received on the question.
  
• Maryland’s House Bill 295, a sweepstakes ban, passed the lower chamber 105-24 in March and then stalled in the state Senate, with the General Assembly adjourning on April 13 without acting. Maryland is simultaneously hosting the appeal in KalshiEx LLC v. Martin before the U.S. Court of Appeals for the Fourth Circuit, the lead federal case on prediction market preemption.
  
• State legislatures are now spending their gambling-policy bandwidth on prediction markets rather than on sweepstakes. Sweepstakes bills that would otherwise have advanced this session have stalled, while prediction market hearings, letters and litigation are absorbing the legislative and media oxygen.

A $22 billion number that surprised no one

The number had leaked twice before it was confirmed. Bloomberg first reported the figure on March 19; the investors had been telegraphing it for weeks; and so, when the press release finally hit the wire at 8:08 a.m. Eastern on May 7, it landed as a formality rather than a surprise: Kalshi had raised $1 billion in a Series E round at a valuation of $22 billion.

A formality, but a consequential one. To understand why the rest of the gambling world is now arranging itself around that number, you first need to understand what Kalshi is.

The company is a New York-based prediction market, founded in 2018 by two graduates of the Massachusetts Institute of Technology (MIT), Tarek Mansour and Luana Lopes Lara.

Its users buy ‘yes’ or ‘no’ contracts on real-world outcomes: elections, inflation prints, Federal Reserve decisions, Super Bowl winners, March Madness brackets. The company operates under the federal CFTC, rather than any state gambling regulator. That single detail makes the entire dispute around it possible.

Bigger than DraftKings, four times Caesars, paying zero gaming tax

That same regulatory positioning is what makes the Series F round meaningful beyond its size. The lead investor was Coatue Management, the New York investment firm. Sequoia Capital, Andreessen Horowitz, Paradigm, IVP, Morgan Stanley and ARK Invest joined the round.

The resulting valuation is double what the company was worth five months ago, as TechCrunch reported on the day of the announcement, and puts Kalshi at nearly twice the current market capitalization of DraftKings and roughly four times that of Caesars Entertainment, and within range of FanDuel, the licensed sportsbook with the largest U.S. gross gaming revenue share, operates in more than twenty U.S. states and pays gaming tax in every one of them. Kalshi does not pay any of that gaming tax.

Kalshi does not. Whether it should is the question every state attorney general, federal judge, trade group and licensed operator is now arguing about. And that argument is the single biggest reason the U.S. sweepstakes casino sector has spent the spring outside the regulatory spotlight, even as the underlying legal pressure on dual-currency models has continued without pause.

The eight days that reshaped the conversation

The Kalshi round did not arrive in isolation. It landed inside a cluster of events stretched across roughly eight days that, taken together, completed a pivot the U.S. gambling industry has been absorbing since late 2025.

It began on May 5. AGA president and chief executive officer Bill Miller stood next to Nevada Gaming Control Board (NGCB) Chair Mike Dreitzer at the Economic Club of Las Vegas and laid out the trade group’s case that prediction markets are operating as illegal sportsbooks under a federal regulatory cover that, in his telling, will not hold up in court.

Dreitzer, whose board has been the most aggressive state regulator on the issue, has previously characterized prediction markets as an existential threat to Nevada’s gaming economy. The trade group and the state regulator appearing side by side on the same stage signalled a coordination that had not been visible a year earlier.

Two days later, on May 7, the AGA published its Q1 2026 Gaming Industry Outlook, a biannual survey of senior executives conducted by Oxford Economics. The headline number, picked up by the Las Vegas Sun, was that 81 percent of those executives now view prediction markets as a “very significant” threat to their businesses. In the same survey, executive sentiment about the broader gaming sector hit its highest level since the third quarter of 2022. Two facts pointing in opposite directions, in the same morning’s report.

The political response landed the next day. On May 8, a bipartisan coalition of 41 state attorneys general filed a letter urging the CFTC to drop its claim that sports event contracts fall within its exclusive jurisdiction. That letter built on one sent eight days earlier by congressional Democrats: on April 30, a group led by Senator Jeff Merkley, D-Ore., sent the CFTC its own letter, as CNBC reported, describing what they called “the rapid erosion of integrity” within prediction markets.

The Merkley letter cited a run of insider trading episodes: three political candidates suspended for betting on themselves, a YouTube editor for the creator known as MrBeast banned for trading on his employer’s unreleased videos, a user of the crypto-based prediction market Polymarket who reportedly cleared $300,000 on then-President Joe Biden’s last-minute pardons, and a U.S. soldier arrested for $400,000 in alleged trades placed ahead of military action in Venezuela.

Stack those events on top of one another and the result is clear. Federal policymakers, state regulators, the licensed casino industry, the tribal gaming sector and a slice of Wall Street are all now looking in the same direction. They are looking at Kalshi and at its closest rival, Polymarket.

The legal pressure on the sweepstakes sector has not lifted. But the public attention on it has.

What changed for sweepstakes operators, and what did not

To see how complete the shift in attention has been, it helps to remember what the previous conversation sounded like. The sweepstakes category was the gambling story of 2025. California’s Assembly Bill 831, signed by Governor Gavin Newsom in October and effective January 1, 2026, shut dual-currency operators out of the country’s largest market.

The New York Attorney General issued cease-and-desist orders against 26 operators in June, and the legislature followed with a ban that Governor Kathy Hochul signed in early December. New Jersey’s Assembly Bill 5447, enacted as P.L. 2025, c.128, prohibited the sweepstakes wagering model in that state as of August 15. Connecticut, Montana, Maine and Indiana followed in their own sessions.

Somewhere in the middle of the prediction market boom, that drumbeat thinned out.

The ruling that turned a regulatory fight into a constitutional one

The reason the prediction market dispute now occupies so much attention can be traced to a single, 29-page document.

On November 24, 2025, Chief U.S. District Judge Andrew Gordon of the District of Nevada issued the order that turned the Kalshi dispute from a regulatory disagreement into a constitutional one.

Gordon had granted Kalshi a preliminary injunction back in April, blocking the NGCB from enforcing a cease-and-desist letter that called the company’s sports event contracts unlicensed sports betting. Seven months later, after parallel rulings against the crypto platform Crypto.com in his own court in October and against Kalshi by a federal judge in Maryland over the summer, Gordon reversed himself, as Bloomberg reported the day the order was made public.

The language Gordon used in dissolving his own injunction has since become the most widely circulated passage in U.S. gambling jurisprudence this year. ‘Kalshi relies on a strained reading of the already convoluted Commodities Exchange Act in an attempt to evade state regulation,’ Gordon wrote. “Kalshi’s interpretation would require all sports betting across the country to come within the jurisdiction of the CFTC, rather than the states and Indian tribes. That interpretation upsets decades of federalism regarding gaming regulation, is contrary to Congress’ intent behind the CEA, and cannot be sustained.’

Gordon added that, while “there are serious questions on the merits” of the dispute, Kalshi was unlikely to succeed on its preemption claim. The 29-page order stands as the most detailed federal-court rejection of Kalshi’s preemption argument issued to date.

Where the prediction market and sweepstakes arguments intersect

Kalshi has been appealing the order ever since. The Ninth Circuit denied its emergency stay request in February. The Fourth Circuit questioned the company over its preemption claims in early May.

This is where the dispute over prediction markets becomes directly relevant to the sweepstakes category. The argument Kalshi is making, that it is a federally regulated derivatives exchange and therefore not subject to state gambling law, runs on a similar logic to the argument many sweepstakes operators have used for years.

Those operators contend their dual-currency offerings are promotional sweepstakes governed by federal sweepstakes rules and longstanding promotional law (the often-cited example is the McDonald’s Monopoly game), rather than gambling subject to state casino licensure. Both positions rest on the question of where federal regulatory authority ends and state gaming authority begins.

If Kalshi loses that question on appeal, sweepstakes operators citing analogous federal-versus-state arguments will be doing so against a less favorable precedent. If Kalshi wins, the sweepstakes industry gains a new appellate ruling it can point to. Either way, the legal question the courts are now resolving extends well beyond Kalshi itself.

What Kalshi also has, beyond the legal argument, is capital. The company told Bloomberg its annualized revenue now exceeds $1.5 billion. It will outspend almost every plaintiff it faces.

The pitch, and the pushback

That financial firepower is what the May 7 disclosure was designed to communicate. The investor logic in the release was direct. “Kalshi is building the leading platform for trading in real-world events,” Coatue founder Philippe Laffont said in the statement. “Consumers have already embraced it, and we believe institutions will follow.” The supporting numbers, also disclosed in the release: institutional trading volume on Kalshi has risen 800 percent over the last six months, annualized volume has tripled in the same period from $52 billion to $178 billion, and Kalshi now accounts for more than 90 percent of U.S. prediction market activity.

Mansour framed the moment as a generational shift. “There are few categories in recent history that have scaled this quickly outside of AI,” he said. “Event contracts could become a trillion-dollar market, and we’re still in the early stages of that transition.”

That is exactly the framing Miller and the AGA have spent six months trying to puncture. The trade group has estimated that prediction markets have diverted more than $480 million in potential sports betting tax revenue away from states since sports event contracts first appeared in early 2025. To make the scale of the cannibalization concrete, the Las Vegas Sun reported that Nevada sportsbooks took $133.8 million in wagers on Super Bowl 60, the state’s lowest Super Bowl handle in roughly a decade, while users on Kalshi simultaneously traded more than $1 billion in Super Bowl-related contracts, a 2,700 percent year-over-year increase.

Miller has not been making the case alone. At the East Coast Gaming Congress at the Hard Rock Hotel & Casino Atlantic City last month, former New Jersey Governor Chris Christie joined him at the lectern. Christie, who as governor signed the 2012 state law that produced Murphy v. NCAA, the 2018 Supreme Court decision that opened American sports betting, called the case against Kalshi a constitutional one. “This is a state’s rights issue, and the states should govern it,” he said.

The trouble for the AGA is that its own membership has been splintering on the question. DraftKings and FanDuel, both of which launched their own prediction market products last autumn, withdrew from AGA membership shortly after. Fanatics, which has launched Fanatics Markets, also left. Caesars Entertainment, MGM Resorts, Rush Street Interactive and PENN Entertainment remain in. The split has left Miller arguing publicly against a product some of the country’s largest gambling operators are now selling, with the result that the AGA’s message on prediction markets is now being delivered by a smaller and less coordinated coalition than it was a year ago.

What this means for the sweepstakes category

This is where the threads pull together, and where the answer to the question of who is actually benefiting from the standoff becomes clearer.

It is difficult to find a public statement from any major sweepstakes operator about the Kalshi raise. That absence is the point.

VGW, widely reported to be the largest operator in the category, has been operating without its founder since early February. Laurence Escalante remains on leave pending his criminal case in Western Australia, and under acting CEO Mats Johnson the company has kept a lower public profile than under its former chairman. Stake.us is fighting class actions in Illinois, California, Missouri, Ohio and Virginia, including a December RICO complaint filed in the Eastern District of Virginia that also names rapper Drake and streamer Adin Ross. Pulsz operator Yellow Social Interactive has settled two Kentucky cases for a combined total of roughly $4.92 million. High 5 Games Casino was hit with a $24.9 million Washington state class action verdict in February 2025.

Each of these would, in a different news cycle, be the dominant gambling story of its week. They have not been. The trade press has covered them, mainstream press has largely not.

That absence of national coverage comes with consequences. National attention drives legislative urgency, and legislative urgency is what determines how much bandwidth state lawmakers spend on bills like Maryland’s HB 295. Without it, sweepstakes operators have been left to handle their cases in court and their state-by-state exits without national press coverage. For the category as a whole, the lack of spotlight is itself an operational advantage, particularly for operators rebuilding their compliance frameworks and their geographic operations.

What happens next

Three things are worth watching over the rest of May.

The Fourth Circuit ruling in KalshiEx v. Martin. If the appellate panel sides with Maryland on the preemption question, Kalshi’s federal jurisdiction argument suffers a body blow in roughly half the country. Such a ruling would, by analogy, supply state attorneys general with a precedent they could cite against the parallel federal-versus-state arguments sweepstakes operators have been making in their own filings. A ruling in Kalshi’s favor would have the opposite effect.

The CFTC’s advance notice of proposed rulemaking. Issued in March and currently in public comment, the rulemaking is the moment at which the agency must commit to paper which event contracts it considers permissible. CFTC chair Michael Selig has been publicly conciliatory, telling CNBC’s Squawk Box in March that state regulators were attempting “to effectively nullify federal law.” The Merkley letter and the letter from the 41 state attorneys general are designed to shape what the final rule looks like.

Whether any major sweepstakes operator follows Kalshi’s playbook. Operator counsel at recent gambling industry conferences have begun openly discussing whether to shift from the current “regulate us, please” posture to a more litigious one, taking state attorneys general to court the way Kalshi has.

The case for the shift is the one Kalshi has just made by raising $1 billion: aggressive litigation, with enough capital behind it, can buy years of operating runway. The case against it is the one Judge Gordon’s order made on November 24. Courts that engage seriously with these arguments have often found their way back to the state-authority side of the question.

For now, the regulatory floodlights are pointed elsewhere. The sweepstakes industry has been handed something it could not have bought at any price: an interval out of the spotlight. What it does with that interval is the next story.

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