Nevada Files Lawsuit to Block Kalshi from Sports Prediction Markets

TLDR:

• Nevada sues KalshiEX for offering unlicensed sports betting contracts.
• Kalshi fights back, claiming federal authority over prediction markets.
• Nevada seeks injunction against Kalshi’s sports event contracts.
• Massachusetts and Ohio also take legal action against Kalshi.
• The outcome may set a precedent for prediction market regulation.

The Nevada Gaming Control Board has filed a lawsuit against KalshiEX LLC, accusing the federally regulated prediction market of offering unlicensed sports betting contracts in the state. The Nevada regulators argue that Kalshi’s event contracts violate state gaming laws. Nevada is seeking an injunction and declaratory relief to prevent the company from operating in the state without a license.

Kalshi’s Challenge to State Authority

Kalshi, a company regulated by the Commodity Futures Trading Commission (CFTC), quickly responded by seeking to move the case to federal court. The company insists that its event contracts, which allow users to bet on various sports outcomes, are not traditional bets. Instead, Kalshi considers these financial derivatives governed by federal law, not state gaming regulations. It maintains that the CFTC holds exclusive authority over such contracts and that federal law preempts state rules.

Nevada disputes Kalshi’s stance, claiming that these contracts are similar to traditional sportsbook wagers. State regulators argue that Kalshi’s operations fall under Nevada’s strict gaming laws, requiring the company to obtain a license. They further assert that Kalshi’s activities undermine Nevada’s tightly regulated gaming industry. This case is part of a broader debate across the nation regarding whether prediction markets should be regulated by state gaming boards or by federal authorities.

Ongoing Legal Disputes Over Prediction Markets

This legal battle is not unique to Nevada. Other states, including Massachusetts, Maryland, and Ohio, have filed lawsuits or issued cease-and-desist orders against Kalshi and similar companies. In February, a Massachusetts judge granted an injunction against Kalshi’s sports event contracts, a ruling that Nevada now seeks to replicate. If Nevada prevails in its lawsuit, it would become the second state to block Kalshi from offering sports-related event contracts.

The Commodity Futures Trading Commission has defended its jurisdiction over prediction markets, arguing that these contracts are a form of swaps and fall under federal oversight. Despite this, states continue to challenge the legality of such markets, especially those involving sports events. The outcome of these cases may set a significant precedent for how prediction markets will be regulated in the future, determining whether they will operate under a single federal regime or be subject to a patchwork of state laws.

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