Nevada Sues Kalshi in New Prediction Market Clash

• Nevada accuses Kalshi of offering unlicensed sports-linked wagering contracts.
• Kalshi argues federal CFTC oversight preempts state gaming laws.
• The case could define whether prediction markets follow federal or state rules.

Nevada has escalated its fight against prediction market platform Kalshi by filing a civil enforcement action in Carson City District Court. The Nevada Gaming Control Board (NGCB) claims that Kalshi’s sports-linked event contracts amount to unlicensed gambling under state law.

Regulators seek declaratory relief and an injunction to block Kalshi from offering contracts to Nevada residents without a gaming license. The complaint argues that making event contracts available in the state without Nevada Gaming Commission approval violates several provisions of Nevada’s gaming code.

NGCB Chairman Mike Dreitzer said the board will continue to protect Nevada residents and uphold the state’s tightly regulated gaming system.

Nevada Moves to Block Event Contracts

Nevada regulators believe that the contracts offered by Kalshi are similar to sportsbook bets because they enable individuals to place bets on sports outcomes. The regulatory body is of the opinion that such activities clearly fall within the gaming regulatory powers of Nevada.

The lawsuit asserts that the unlicensed operators pose a threat to the integrity of the  regulatory framework in Nevada. The state has built its economy around strict gaming oversight, and regulators say they will not allow alternative structures to bypass that system.

Kalshi responded swiftly by seeking to move the case to federal court. The company insists that it operates under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC). It describes its contracts as financial derivatives, not traditional bets.

Federal Oversight vs. State Authority

Kalshi is a CFTC-regulated exchange. The company asserts that federal law supersedes state gambling regulations with respect to event contracts. It asserts that Congress delegated regulatory power over derivative markets, including event contracts, to the CFTC.

Nevada vigorously disagrees. The state’s regulators assert that sports-related contracts are similar to gambling products and are therefore subject to state regulation. This case illustrates a national conflict over prediction markets.

Other states, including Maryland, New Jersey, Ohio, and Tennessee, have disputed similar services. Some regulators have issued cease-and-desist orders, while others have initiated lawsuits to block sports event contracts.

You can review federal derivatives regulations on the CFTC’s official website. Nevada’s gaming framework and enforcement actions appear on the Nevada Gaming Control Board website.

A Defining Moment for Prediction Markets

The CFTC has asserted its jurisdiction in previous cases and has argued for the derivative status of event contracts. Kalshi has obtained only temporary reprieve in previous court cases, but these decisions have not resolved the question of jurisdiction in general.

Nevada has also taken action against other entities connected to prediction markets, including legal action involving partnerships tied to crypto platforms. Regulators aim to prevent what they view as regulatory loopholes.

The outcome of this case could reshape the U.S. prediction market landscape. A victory for the federal courts in Kalshi’s favor could establish a national framework for prediction markets. A victory for the state of Nevada could lead to a confusing patchwork of state gaming laws for such sites.

The current lawsuit puts federal derivatives regulators directly at odds with state gaming authorities. The courts will ultimately decide which entity gets to control this rapidly expanding industry.

Highlighted Crypto News:

Grayscale’s Sui Staking ETF(GSUI) Set to Begin Trading on NYSE Arca