The warning behind the headline
Would you call it trading or betting if you paid 62 cents for a contract that pays out one dollar when your team wins? That question is now worth a whole industry, because in mid-October 2026 Kalshi chief executive Tarek Mansour warned that prediction markets could leave the United States altogether if courts side with individual states on who gets to regulate them. A prediction market is a venue where people buy and sell contracts tied to the outcome of a real-world event, and the contract pays a fixed amount if that outcome happens.
Speaking at DC Fintech Week in Washington, Mansour framed the fight in stark terms: “It’s not a choice of state versus federal market. It’s a choice of whether prediction markets exist in the US or whether they go offshore.” He added that he felt “pretty good” about Kalshi’s legal position, even after setbacks in some courts. That is a sentence worth sitting with, because the offshore pattern he described is one that players in plenty of markets, including India, already live with every day.
What a prediction market actually is
A prediction market lets you take a position on whether a stated event will happen, with the price of each contract moving as traders disagree about how likely it is. Buy at 62 cents, and you risk 62 cents to make 38 if the event resolves yes. Sell the same contract, and you are taking the other side.
In the United States these instruments are called event contracts, and the regulator claiming jurisdiction over them is the Commodity Futures Trading Commission, the federal body that oversees derivatives markets. That matters for the argument platforms make. If an event contract is a derivative, it belongs in the same legal family as a futures contract on wheat or interest rates, and federal commodities law governs it. If it is a wager on an uncertain outcome, it belongs to state gambling law, and fifty separate licensing regimes apply. The two readings lead to completely different businesses.
Kalshi explained: following one contract from purchase to settlement
Kalshi is a CFTC-regulated exchange where users trade binary yes/no contracts on event outcomes, and each contract settles at one dollar or zero once the event resolves. Walk through a single position and the mechanics become clear.
You open a market and see a quote. Someone else, another user, is willing to sell the yes side at 62 cents, which means they are implicitly willing to buy the no side at 38. You hit that price. Now you hold a contract whose value will swing as news arrives and other traders re-price the outcome. You are not locked in. Before resolution you can sell your position to whoever will pay for it, at a profit or a loss, exactly as you would unwind any other traded instrument. When the event resolves, the contract settles at one dollar if you were right and nothing if you were not.
Two features of that story do real work in the legal argument. The counterparty is another trader rather than the venue, and the price comes from order flow rather than from a pricing desk. The exchange earns from fees on trades rather than from a margin built into the price. Mansour has also pushed back on claims about volumes in Kalshi’s crypto perpetual-futures markets, which tells you how closely the figures behind these venues are being scrutinised.
Event trading vs gambling: where the difference is real
The mechanical difference between an event contract and a sportsbook bet is genuine, not a marketing gloss, and it sits in who sets the price and who takes the other side.
Pricing and liquidity against fixed odds
| Feature | Event contract on an exchange | Fixed-odds bet with a bookmaker |
|---|---|---|
| Who sets the price | Traders, through bids and offers | The operator, through its odds |
| Who takes the other side | Another user | The operator itself |
| How the venue earns | Trading fees | Margin built into the odds (the overround) |
| Exit before the result | Sell the position at market price | Only if cash-out is offered, on the operator’s terms |
| US classification claimed | Derivative under federal commodities law | Gambling under state law |
Compare that to a slot or a roulette wheel and the gap widens further. There, the house edge is a fixed mathematical property of the game: European roulette returns 97.3% over the long run because the zero is baked into the layout, and no amount of price discovery changes it. On an exchange, there is no built-in edge of that kind, only the fee and your own read of the probability.
Two legal boxes, one activity
Here is where I come down, and the opposing view is not foolish. The derivatives reading has real substance: hedging an election result, a weather outcome or an interest-rate move is a legitimate economic function, and the peer-to-peer structure is nothing like a sportsbook taking the other side of your parlay. But from where you sit as a retail user clicking buy on a contract about Sunday’s game, the activity is risking money on an uncertain outcome you cannot control. The protections you need should follow the function, not the label on the box. A platform can be a properly regulated exchange and still be somewhere you can lose money fast.
Why Kalshi’s CEO raised the offshore scenario
Mansour’s warning was triggered by the unresolved litigation over whether state gaming regulators can apply their own rules to event contracts, after courts delivered mixed results. His point was not that state oversight would be inconvenient. It was that a federally regulated exchange cannot realistically rebuild itself as fifty separately licensed gambling operators, so the practical outcome of a state win would be relocation rather than compliance.
Moving offshore, in practice, means incorporating and licensing the operation in a jurisdiction that permits it, serving users from there, and sitting outside the reach of the US regulator that currently supervises the venue. The business survives. What changes is which rulebook, if any, applies to the person holding the contract.
How regulatory pressure pushes gambling-adjacent products offshore
When domestic classification disputes drag on, operators relocate to lighter-touch jurisdictions to keep trading, a pattern usually described as regulatory arbitrage or jurisdiction shopping. It is not new and it is not unique to prediction markets. Offshore casino and sports betting sites have followed exactly this route for two decades, holding a licence from a permissive jurisdiction while accepting customers from markets where their legal status is contested or simply unaddressed.
Indian players know the shape of it well. A large share of the casino and betting sites reachable from India operate from outside the country, under foreign licences, in a grey zone where nothing is clearly authorised and nothing is clearly stopped. The product keeps working. The regulator who would hear your complaint is somewhere else, under a different legal system, with no obligation to you.
What offshore status costs you as a user
Offshore operation shifts the risk of something going wrong from the platform to you, because the body that supervises it is no longer one you can reach. The concrete consequences are worth naming plainly:
- Legal recourse narrows to the courts or regulator of the licensing jurisdiction, if one will take the complaint at all.
- Fund segregation becomes a promise in the terms rather than a supervised requirement, so a balance you can see may not be a balance that is protected.
- Responsible-gambling tools such as deposit limits, loss limits, cool-off periods and self-exclusion are often absent or voluntary, because no regulator mandates them.
- Verifying the licence itself gets harder: a logo in a footer is not evidence, and some registries are far easier to check than others.
- Payment and withdrawal friction rises, including KYC demands that appear only when you try to cash out.
None of that is an accusation against any named platform. It is the baseline you inherit when supervision moves out of your own jurisdiction, and it applies to a well-run offshore exchange and a poorly run offshore casino alike.
Trading or gambling: the question nobody has settled
The US courts have not answered whether event contracts are derivatives or wagers, and until they do, the regulation of betting-like markets remains a live argument rather than a settled rule. If the federal reading prevails, prediction markets stay onshore under CFTC supervision with the consumer protections of a securities-style regime but few of gambling’s. If the states prevail, Mansour’s offshore scenario is the realistic alternative, and users end up dealing with venues no domestic regulator supervises.
What you can actually control is smaller than the debate but more useful: before you put money on any event contract, sportsbook or casino product, find out which regulator licenses it, confirm the licence against that regulator’s own register, and read what happens to your balance if the operator stops trading. If a platform relocates, that answer changes, and you will not get a notification saying so. If gambling or trading on events stops feeling like a decision and starts feeling like a need, the limit and self-exclusion tools worth using are the ones a real regulator requires.