This story was produced as part of the Colorado Capitol News Alliance. It first appeared at cpr.org.
One of the largest prediction market platforms operates in Colorado essentially as a sportsbook outside the regulated system, according to state officials, complicating efforts to collect taxes and protect consumers.
Kalshi — which says it’s the largest prediction market in the U.S. — looks almost identical to a sportsbook, yet doesn’t pay taxes that support water projects like other sportsbooks. It’s not licensed by the state and not subject to state rules designed to protect those with gambling addiction.
Kalshi calls them “predictions,” not bets, and the “contracts” can be purchased on everything from team wins and losses to how many points a player will score in a game.
The rise of prediction apps comes as Colorado lawmakers are debating final passage this week of the most significant reform to sports betting since legal wagers started in 2020, as concerns rise about addiction and the impact on youth. The bill would, among other things, limit daily deposits, prohibit sportsbooks from advertising to audiences that are primarily under 21 years old and ban credit card transactions.
“I was raised by a gambling addict, and I've witnessed firsthand its devastating impacts and the stress it puts on families,” said Rep. Steven Woodrow, D-Denver, before the bill was passed on second reading in the House on Thursday.
But the bill’s protections would not apply to Kalshi, and Kalshi says that’s for good reason: it’s not a sportsbook, it’s an “exchange.”
“Kalshi is an exchange that sits between two sides of a yes/no swap and a contract,” said Sara Slane, head of corporate development at Kalshi. “Whereas a sportsbook, it is the house, they set the line. And so it's just a much different business model.”
Kalshi doesn’t pay sports betting taxes in Colorado. Slane said Kalshi doesn’t have “gross gaming revenue,” which is calculated as wagers minus payouts. Those proceeds are taxed by Colorado at a 10% rate. Kalshi makes money instead by charging a fee to facilitate a contract position.
In 2019, Colorado voters approved legalizing sports betting, directing the tax revenue primarily to water projects. Since then, sports betting has taken off in Colorado, with total wagers rising 70% from 2021 to 2025. The Division of Gaming reports about $105 million raised for water projects since sports bets started.
It’s unknown how many sports predictions are placed on Kalshi in Colorado, but a recent analysis by Eilers & Krejcik Gaming, a consulting firm, claims Kalshi would rank among the biggest sports betting operators on a per-adult basis.
Kalshi is fighting numerous legal battles across the country that have produced mixed results.
In New Jersey last month, Kalshi won an appeals decision in federal court saying state regulators cannot stop the company from accepting sports contracts. But in Massachusetts, a state judge granted a preliminary injunction against Kalshi in January, and earlier this week that state’s highest court heard arguments over whether Kalshi can offer sports-event contracts without a sportsbook license.
Kalshi is regulated by the Commodity Futures Trading Commission, and the CFTC filed a brief in the Massachusetts case in support of Kalshi accepting sports-event contracts there.
Colorado Attorney General Phil Weiser joined 41 other attorneys general last week arguing to the CFTC that platforms like Kalshi and Polymarket are basically unregulated sportsbooks and therefore “unlawful activity.”
“The regulated market involves consumer protections, it involves safeguards, it involves a licensed provider, it involves money for our water plan,” said Weiser in an interview. “And if you have someone who can provide a substantially similar product, that people are not going to see the real difference without those things, you're undermining the regulated system. You're undermining the will of Colorado voters.”
The state Division of Gaming would not comment on Kalshi operating outside the regulated system in Colorado, but in a statement, a spokesperson said it is monitoring the various cases making their way through the courts.
Slane, the Kalshi executive, said the cases are likely to migrate eventually to the U.S. Supreme Court, but she declined to offer any predictions.
“Courts are like a box of chocolates. You never know what you're going to get.”
