Attorneys for the Nevada Gaming Control Board submitted 18 defenses to Kalshi’s lawsuit over cease-and-desist orders used to shut down their sports prediction markets.
The defenses discussed a number of points, namely that Nevada’s gaming laws don’t conflict with the Commodity Exchange Act (CEA) and that the CEA was never intended to usurp state laws.
Key Takeaways
- One of the defenses claimed that Kalshi argued a different position from one it already successfully used
- Nevada also said that Kalshi can’t take federal legal action against the Silver State
- 34 states signed an amicus brief in support of New Jersey’s legal battle with Kalshi
Three of Nevada’s defenses submitted on Wednesday stand out above the rest. The first two reiterate that federal law should not inherently supersede state law unless specifically outlined and that the state’s gaming laws don’t intersect with the CEA:
- Congress did not intend to preempt state gaming laws with the enactment of the Commodity Exchange Act
- Presumption against preemption
- Nevada State Gaming Laws do not conflict with the Commodity Exchange Act
Attorneys also said that Kalshi, headquartered in New York, was barred by immunity, a principle that protects states from being sued in federal court by citizens of other states.
Additionally, they argued that Kalshi judicial estoppel, which prevents a party from taking a legal position different from one they previously and successfully took, and collateral estoppel, which prevents a party from relitigating an issue that was already settled.
Other defenses claimed that Kalshi failed to prove it would suffer “irreparable harm” because Nevada’s gaming regulator acted in bad faith to seek relief and violated the 10th amendment's allocation of powers not specifically awarded to the federal government to the states.
Tracking back to the start
Nevada’s gaming regulator issued a cease-and-desist order to Kalshi in early March. Kalshi responded by levying lawsuits against regulators in New Jersey, Nevada, and Ohio, all of whom attempted to use cease-and-desists to stifle their sports prediction contracts.
Kalshi CEO Tarek Mansour has maintained that his trading platform doesn’t need to acquiesce to state regulators since Kalshi is in compliance with federal regulations mandated by the Commodities Future Trading Commission.
With regard to sports contracts, state regulators argued that they circumvent the licensing procedure and allow Kalshi to act as an unregulated sportsbook. Mansour disagreed, claiming that sports event contracts are different since users trade contracts among themselves and don’t compete against the house.
States rally against Kalshi
Sports event contracts offered by prediction platforms have become increasingly popular recently. Depending on the event, they can offer better odds, and therefore better payouts, to customers than traditional sportsbooks - especially those in high-tax states such as Illinois, where sportsbooks implemented a surcharge on wagers in response to recent tax hikes.
However, opposition to prediction platforms has also grown among state regulators. Nevada Attorney General, Aaron Ford, and Ohio Attorney General, Dave Yost, led a coalition of 36 jurisdictions in filing an amicus brief in support of New Jersey, which was also taken to court by Kalshi.
The brief echoed similar sentiments to the ones used in Nevada’s defense, stating that the courts should not assume the federal government intended to drastically reshape the order of operations regarding gaming regulations.
