Ohio Company Challenging Prediction Markets Bets on Staying in State Court

When the Supreme Court of the United States struck down federal restrictions on sports betting in 2018, it ushered in a new era of legalized wagering. As states moved swiftly to authorize sports gambling, online sportsbooks proliferated. More recently, prediction markets have emerged as a new vehicle for speculating on uncertain events. Their proponents argue these platforms differ fundamentally from traditional gambling: participants trade contracts with one another—one side pays out if an event occurs, the other if it does not—while the platform merely takes a commission for facilitating the transaction. Critics, however, contend that prediction markets are little more than rebranded sportsbooks that may also invite insider trading.

To date, companies such as Kalshi and Polymarket have largely avoided state regulation as sportsbooks. Instead, they operate under federal oversight by the Commodity Futures Trading Commission (CFTC), which under the current administration is largely supportive of the fledgling industry. While CFTC oversight has thus far insulated prediction markets from most state-level enforcement, some private litigants are attempting to fill the regulatory gap.

One such entity, Ohio Gambling Recovery LLC (“OGR”), was formed to pursue claims against Kalshi, Robinhood, and other platforms offering prediction-market contracts on sports events under an obscure Ohio statute modeled on an 18th-century British law enacted during the reign of Queen Anne. The statute creates a cause of action for individuals who have paid money on a losing wager to recover those losses. Notably, if the losing bettor does not file suit within six months, “any person” may sue to recover the amount lost.

OGR alleges that Kalshi and others are operating illegal gambling enterprises and seeks to recover all wagering losses incurred more than six months before suit where no individual recovery action was filed. OGR initiated the case in state court—likely viewing it as a more favorable forum—but the defendants promptly removed it to federal court. OGR has moved to remand, arguing, inter alia, that the case presents purely state-law claims and does not qualify as a class action because the statute permits OGR to recover in its own right rather than on behalf of individual bettors.

The motion has been fully briefed for months, and a decision could issue at any time. Because the defendants are expected to raise federal preemption and related defenses, a federal forum could prove advantageous. Jaszczuk P.C. will continue to monitor developments in this matter.