A division of Crypto.com on Tuesday filed a federal lawsuit against Nevada’s gaming regulators for allegedly occluding its sports event contracts.
The lawsuit accused the Nevada Gaming Control Board (NGCB) of improperly shutting down part of the platform’s business while others were allowed to continue offering sports markets.
Key takeaways
- Kalshi won a case in Nevada that said it could not be state-regulated
- crypto.com received a cease-and-desist order on May 20
- The next CFTC chair nominee supports a free market
North American Derivatives Exchange Inc., crypto.com’s derivatives business, submitted the lawsuit in the U.S. District Court for Nevada. The case was randomly assigned to Judge James C. Mahan and Magistrate Judge Daniel J. Albregts.
Strife has risen over Nevada officials enforcing state-level governance against a federally regulated platform, of which crypto.com is one of several. The trading outlet and others like it, including Kalshi and Robinhood, report to the Commodity Futures Trading Commission (CFTC).
“NGCB has no authority to regulate, let alone prohibit, derivatives trading offered by a federally regulated designated contract market operating pursuant to federal law,” North American Derivatives Exchange Inc. wrote in its lawsuit.
Nevada’s gaming regulator issued a cease-and-desist order to crypto.com on May 20. It threatened the platform with criminal and civil penalties if it continued offering sports prediction markets in Nevada, widely viewed as the epicenter for American gambling.
Regulators took the position that sports event contracts mimic traditional sports betting, except they come from unlicensed platforms and are thereby illegal.
Still at the federal level
The CFTC has previously reviewed sports event contracts and declined to restrict them. It also in April canceled an upcoming roundtable to discuss the bubbling topic.
A medley of free-market organizations this week wrote to the CTFC, encouraging it to continue allowing sports event contracts. That directly supported comments made by President Trump’s next CFTC chair nominee, Brian Quintenz, who said that event contracts are “almost always” authorized by the CFTC.
“We therefore respectfully request that the CFTC issue a policy statement stating two things,” the groups wrote. “First, that event contracts offered on prediction markets are subject to the exclusive jurisdiction of the CFTC. And second, that the CFTC will police behavior of prediction market venues but will not restrict the subject matter of the event contracts offered by the venues.”
U.S. District Judge Andrew Gordon in April ruled that the NGCB could not regulate Kalshi due to federal law taking precedence over that of the state, striking a landmark victory for the leading provider of event contracts.
Disharmony grows
Disagreement between prediction platforms and state regulators has grown across the country.
On Monday, Arizona’s gaming regulator wrote to the CFTC asking for sports contracts to be removed from prediction platforms. Tennessee, Maryland, at least five other states, and the NBA have also written the CFTC with varying degrees of concern.
