Crypto wallet provider Phantom is moving forward with the integration of Kalshi prediction markets for its U.S. users, launching the new feature on October 23, 2026. The rollout allows users to trade on the outcome of real-world events directly within the Phantom app, a significant step that comes as Kalshi battles a wave of lawsuits from numerous states challenging the legality of its offerings.
Despite the intense legal scrutiny facing its new partner, Phantom’s leadership remains resolute. The company is banking on the authority of the U.S. Commodity Futures Trading Commission (CFTC), which regulates Kalshi as a Designated Contract Market and has provided Phantom with legal relief to act as an interface. This sets the stage for a high-stakes clash between federal oversight and state gambling laws.
Phantom launches Kalshi into a legal storm
Phantom’s decision to proceed hinges on a key piece of regulatory assurance: a conditional “no-action” letter issued by the CFTC in March 2026. This letter effectively relieved Phantom from needing to register as a broker to offer access to these derivative products. The relief was later extended to other software providers, signaling the federal regulator’s permissive stance.
Kevin Jacobs, General Counsel for Phantom, expressed the company’s firm position. “Our perspective is that the CFTC’s jurisdiction here is clear,” Jacobs stated. “So long as our interaction with these products is consistent with our no-action position, we are confident and comfortable engaging in this activity.”
Jacobs anticipates that the fundamental question of whether federal law preempts state-level gambling statutes will ultimately be settled by the Supreme Court.
This federal backing is crucial as Kalshi faces an onslaught of legal challenges. States including Utah, New York, Ohio, and Nevada have initiated enforcement actions, arguing that Kalshi’s event contracts constitute illegal gambling under their jurisdictions. Phantom is navigating this complex environment by preemptively blocking certain market categories in specific states to comply with local court orders and regulations while the broader legal battles unfold.
The state-by-state regulatory battleground
The opposition from state regulators has been fierce and widespread, creating a patchwork of legal challenges for Kalshi and, by extension, its partners. At least ten states have taken some form of action, arguing that the CFTC’s approval does not override their authority to enforce local anti-gambling laws.
Utah alleges a ‘back-alley gambling den’
One of the most aggressive actions came on October 20, 2026, when Utah Attorney General Derek Brown filed a lawsuit against Kalshi, its affiliates, and two Susquehanna trading firms.
The suit accuses the platform of facilitating illegal gambling and seeks to recover between $30.6 million and $61.2 million in fees allegedly collected from over 32,000 verified users in the state. The complaint claims Utah residents have lost approximately $5.5 million on individual bets.
This legal action followed a series of court victories for Utah. After Kalshi preemptively sued the state in February 2026 to block enforcement, a judge ruled in August that federal law does not supersede Utah’s strict constitutional ban on gambling. An appellate court subsequently denied Kalshi’s request for an injunction, clearing the way for the Attorney General’s lawsuit.
New York, Ohio, and Nevada join the fight
Other states have mounted significant challenges as well. In New York, Governor Kathy Hochul and Attorney General Letitia James sued Kalshi on July 31, 2026, seeking a staggering $36 billion in damages.
In an unusual move, the CFTC used its emergency authority to order Kalshi to continue operating in the state, directly countering the state’s action. A similar dynamic is playing out in Ohio, where state regulators fined Kalshi $5 million in April 2026, a penalty the company is contesting.
Nevada, a state synonymous with legal betting, was the first to issue a cease-and-desist order to Kalshi in March 2025. Since April 2026, a state court has barred Kalshi from offering contracts on sports, elections, and entertainment.
This growing list of legal actions highlights the core tension: Kalshi and Phantom see these as federally regulated financial instruments, while many states see them as a form of unlicensed gambling. Phantom is relying on federal oversight through the U.S. Commodity Futures Trading Commission (CFTC) to legitimize these markets.
This interplay between crypto offerings and traditional finance reflects broader trends, including the increasing integration of digital assets into established payment systems as seen with stablecoin initiatives.
How the integration works for Phantom users
For eligible U.S. users, accessing the new feature is straightforward. A “Predict” tab will now appear in Phantom’s mobile app, leading to Kalshi’s markets. Before placing a trade, users must complete Kalshi’s separate Know Your Customer (KYC) identity verification process.
Initially, trades will be funded using CASH, Phantom’s proprietary dollar-pegged stablecoin held in Phantom Cash accounts. According to Jacobs, “more ways to pay are coming soon.” When a user places a trade, the funds are moved to Kalshi and converted into fiat currency for settlement.
Any winnings or cashed-out funds are returned to the user’s Phantom Cash account. Users will fund these trades primarily with CASH, Phantom’s dollar-pegged stablecoin, via their Phantom Cash accounts; more payment options are expected soon.
The integration demonstrates how crypto wallets are expanding their functionalities, bringing diverse financial products directly to users, much like how new digital asset listings increase accessibility on various platforms.
Phantom is acting as a non-custodial interface, meaning it provides the software to access the markets but does not take custody of user funds during the trading process.
The fee structure is transparent, with Phantom charging a $0.01 prediction fee per contract and Kalshi charging a $0.01 exchange fee, for a combined cost of $0.02 per contract. A small network fee to move funds may also apply.
Market impact and Kalshi’s booming volume
The partnership is a strategic move for both companies. For Phantom, it adds a unique, in-demand feature to its wallet, potentially attracting new users and increasing engagement. For Kalshi, it opens a new distribution channel to a large, crypto-savvy audience, which could significantly boost its trading volumes and market liquidity.
Max Crowley, Kalshi’s Vice President of Business Development, noted that he expects the partnership will bring more users to the platform and improve its market data. The platform is already experiencing explosive growth, with trading volume for 2026 exceeding $291 billion year-to-date. October’s volume has already hit $55.33 billion, putting it on pace to break September’s monthly record of $59.32 billion.
This growth underscores the public’s appetite for event-based trading, a market that has parallels with the speculation seen around new crypto listings and economic events that affect the price of major assets.
Understanding market dynamics is crucial for participants, whether they are engaging with prediction markets or assessing broader trends in digital assets like the Bitcoin investment landscape.
While sports-related contracts make up a significant portion of Kalshi’s revenue—around 65%—the platform offers a wide array of markets on everything from politics and science to culture, which will now be available to Phantom’s user base, subject to state restrictions.