The Nevada Gaming Control Board has filed a lawsuit against prediction market platform KalshiEX LLC, seeking to block its operations in the state for allegedly offering unlicensed sports betting contracts. The lawsuit, filed in state court, requests an injunction and declaratory relief to prevent Kalshi from operating without a Nevada gaming license. Regulators argue that Kalshi's event contracts, which allow users to trade on outcomes of sports events and other real-world occurrences, function like traditional sports wagers and therefore violate state gaming laws.
The legal action followed a significant procedural ruling. A federal appeals court recently rejected Kalshi's effort to block the Nevada case from proceeding, clearing the path for the state's lawsuit. Nevada officials emphasize that their tightly regulated gaming industry, a major part of the state's economy, requires strict licensing and compliance standards. They contend that platforms like Kalshi, which operate without a state license, undermine this regulated market.
Kalshi, which is regulated by the federal Commodity Futures Trading Commission (CFTC), is fighting back. The company has sought to move the case to federal court, arguing that its contracts are financial derivatives, not gambling products, and are therefore governed exclusively by federal law, which should preempt state regulations. The CFTC has defended its jurisdiction, classifying these prediction market contracts as a form of swaps.
This case is part of a broader, nationwide conflict. Other states, including Massachusetts, Maryland, and Ohio, have also taken legal action against Kalshi. In February, a Massachusetts judge granted an injunction against Kalshi's sports event contracts. The outcome of the Nevada lawsuit could set a significant precedent, determining whether prediction markets will operate under a uniform federal framework or be subject to a complex patchwork of individual state laws.
The dispute highlights the tension between rapidly growing, innovative financial platforms and established state regulatory regimes. The final resolution could shape the future of not only prediction markets but also other emerging sectors, including certain crypto-based platforms that face similar legal questions about the boundary between finance and gambling.
