Nevada regulators filed suit Tuesday to block prediction market operator Kalshi from offering sports-related event contracts to state residents.
It's the latest move in the ongoing legal fight over whether such products fall under state gambling law or federal derivatives regulation.
Key Takeaways
- The Nevada Gaming Control Board sued Kalshi, arguing sports event contracts constitute unlicensed wagering under state law.
- The Commodity Futures Trading Commission filed a court brief claiming exclusive federal jurisdiction over prediction markets.
- Similar legal battles are underway nationwide, with courts examining whether event contracts are gambling or regulated swaps.
Kalshi had sought to prevent Nevada from bringing enforcement action. However, on Tuesday, a federal appeals court declined to pause a November ruling from a lower court judge that dissolved an earlier injunction blocking the state’s efforts.
“The Board continues to vigorously fulfill its obligation to safeguard Nevada residents and gaming patrons, and uphold the integrity of a thriving gaming industry,” said Nevada Gaming Control Board chairman Mike Dreitzer in a press release.
If Nevada prevails, it would become the second state to secure a court order against Kalshi. A Massachusetts judge on Feb. 5 granted an injunction at the request of the state's attorney general, though that order was later placed on hold, pending appeal.
Nevada courts have previously barred Coinbase and Polymarket from offering similar event contracts. Shortly after Tuesday’s filing, Kalshi sought to transfer the case to federal court, arguing the dispute hinges on whether the CFTC has sole jurisdiction.
The company maintains its contracts are swaps, a category of derivatives overseen at the federal level.
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Federal regulator asserts authority
The Commodity Futures Trading Commission (CFTC) moved to reinforce its position as the regulator of prediction markets by filing an amicus brief in federal court Tuesday. Chairman Michael Selig wrote in a Wall Street Journal opinion piece that the agency has long overseen event contracts and would intervene in nearly 50 active cases to prevent state encroachment.
He stated the commission will no longer remain idle while states seek statewide prohibitions on what it considers federally regulated products.
Selig previously said the agency was prepared to draft clearer rules governing prediction markets and revisit its role in federal and circuit court litigation. He argued event contracts provide legitimate economic options and operate under federal guidance and regulation as swaps rather than gambling instruments.
Selig described the exchanges offering these contracts as self-regulatory organizations subject to examination and supervision by agency staff. In a video posted Tuesday, he said the message to challengers is direct; the agency is prepared to defend its jurisdiction in court.
