On Tuesday, Kalshi’s CEO Tarek Mansour posted on social media that the prediction market company had partnered with xAI, whose majority owner is Elon Musk. Hours later, the posts were gone.
Key Insights
- Kalshi may have jumped the gun, so there still may be a deal pending
- Prediction market sports betting contracts are currently under fire from states, which could lose out on sports betting tax revenue
- Both Musk and Kalshi have strong ties to the current federal administration
In his original posts, Mansour waxed poetic about Musk, writing, “He has inspired me at every step. I could not be more excited to announce Kalshi’s upcoming partnership with xAI to further take prediction markets mainstream. Together, we’ll shape the future of news and information.”
Hours later, Mansour’s posts were deleted and the financial news service Bloomberg retracted its original story on the deal, noting the disappearing posts in a new article.
Not long after, Kalshi offered this comment, “The statement was posted in error, and while Kalshi has had discussions with xAI, there is no formal partnership at this time.”
Friends of DJT
Both Kalshi and the artificial intelligence company, xAI, have more in common than the potential goal to advance AI in the sports betting world.
Both companies have strong ties to the current presidential administration. Earlier this year, Kalshi took on the president’s son, Donald Trump Jr., as a “strategic advisor.”
Meanwhile, President Trump nominated Brian Quintenz to head up the Commodities Futures Trading Commission (CFTC), the federal agency that regulates prediction market providers. Quintenz, a former CFTC Commissioner, is also a former Kalshi Board member.
President Trump’s ties with Elon Musk are well known. Trump initially gave Musk the reigns to drive deep cuts in government spending under the newly formed Department of Government Efficiency (DOGE). In March, Trump touted Musk’s car company Tesla during a livestream event in front of the White House.
States and prediction markets face off in court
Kalshi’s close administrative ties could help the company in its ongoing litigation with various states, looking to block predictive markets’ latest sports betting services.
Kalshi started offering sporting event contracts earlier this year. Its new contracts are in direct competition with legal sportsbooks.
One key difference between the two business models is that legal sportsbooks are regulated at the state level and pay state taxes. Prediction markets are regulated by the CFTC and pay no state taxes.
As a result, a number of states have filed cease-and-desist orders and lawsuits, attempting to block Kalshi from offering sports event contracts to their residents. So far, Kalshi is standing firm in its opinion that the states lack jurisdiction. So far, the courts are leaning Kalshi’s way.
Last month, the U.S. District Court for the District of New Jersey granted Kalshi a preliminary restraining order and a temporary injunction against the New Jersey Division of Gaming Enforcement, allowing it to continue to operate in the Garden State.
Kalshi won a similar temporary decision in Nevada. Meanwhile, the U.S. District Court in Nevada is currently deciding whether the Nevada Resort Association can intervene in the case, prior to its final ruling.
