Nevada Files Civil Suit Against Kalshi After Ninth Circuit Rejects Company’s Injunction Request
The Nevada Gaming Control Board has moved to block Kalshi’s sports‑event contracts, arguing the prediction‑market platform is operating without a state gambling license. The move follows a U.S. Court of Appeals decision that lifted a temporary stay on the regulator’s enforcement powers.
Background
Kalshi, a Chicago‑based exchange that lets users trade contracts tied to the outcomes of real‑world events, has been in a legal tussle with Nevada since the state’s gaming regulator issued a cease‑and‑desist order in March 2024 demanding the company halt all sports‑related markets. The company argued that its offerings are commodity derivatives regulated by the U.S. Commodity Futures Trading Commission (CFTC), not gambling under Nevada law.
In April, a federal district court granted Kalshi a limited injunction that temporarily prevented Nevada from pursuing enforcement while the case proceeded. Kalshi then appealed that decision to the Ninth Circuit Court of Appeals.
On Tuesday, the Ninth Circuit denied Kalshi’s request to maintain the injunction, effectively removing the barrier that had stopped the Nevada Gaming Control Board from filing a civil action in state court.
The State’s Enforcement Action
Immediately after the appellate ruling, the Nevada Gaming Control Board filed a complaint against Kalshi in state court. The board alleges that Kalshi’s “sports event contracts” constitute wagers on sports outcomes and therefore must be licensed under Nevada’s gambling statutes. Since Kalshi does not hold such a license, the board is seeking an order that would prohibit the company from offering the contested contracts within the state.
Kalshi responded by filing a motion to transfer the case to federal court, reiterating its position that the platform falls under the exclusive jurisdiction of the CFTC as a designated contract market. The company maintains that a narrow reading of federal commodity‑exchange law should preclude state regulators from treating its contracts as illegal gambling.
Federal Regulators Weigh In
The CFTC’s chair, Michael Selig, submitted an amicus brief to the Ninth Circuit supporting Kalshi’s argument and a similar defense for Crypto.com, another firm that has faced cease‑and‑desist letters from Nevada. In the brief, the CFTC asserted that states cannot encroach on the agency’s exclusive authority over commodity derivatives by recharacterizing them as gambling activities.
The agency’s stance underscores a broader regulatory question: whether modern prediction‑market platforms that allow users to speculate on real‑world events are to be overseen as futures markets at the federal level or as gambling operations subject to state licensing regimes.
Industry Context
Kalshi is not the only prediction‑market operator confronting state‑level pressure. Crypto.com filed a lawsuit against Nevada in June after receiving a similar cease‑and‑desist notice, and that case is also pending before the Ninth Circuit. The convergence of these disputes highlights an emerging clash between innovative fintech products and long‑standing state gambling frameworks.
The issue has attracted attention beyond the courtroom. In October, Trump Media and Technology Group announced plans to integrate prediction‑market functionality into its Truth Social platform through a partnership with Crypto.com, while Donald Trump Jr. has served as an advisor to Kalshi since early 2025. These developments suggest that political and commercial interests are watching the regulatory outcome closely.
Analysis
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Jurisdictional Ambiguity – The core of Kalshi’s defense rests on the claim that its contracts are “commodity derivatives” governed by the CFTC. If the Ninth Circuit or a federal court ultimately affirms that view, it could set a precedent that shields a range of prediction‑market platforms from state gambling enforcement, at least insofar as the contracts meet CFTC criteria.
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State Enforcement Leverage – Nevada’s swift filing of a civil suit after the appellate decision demonstrates that states can still pursue enforcement through traditional state‑court mechanisms, even when federal courts temporarily restrain them. The outcome of the Nevada case may influence how other states, particularly those with robust gaming industries, approach similar firms.
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Regulatory Coordination Needed – The CFTC’s amicus brief signals the agency’s willingness to defend its jurisdiction, but the agency has yet to issue clear, industry‑wide guidance on how prediction markets fit within existing commodity‑exchange rules. A lack of definitive policy may continue to fuel litigation.
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Market Impact – Ongoing legal uncertainty could deter users and investors from engaging with prediction‑market platforms that operate in jurisdictions with aggressive gambling regulators. Conversely, a favorable ruling for the platforms could unlock broader adoption and integration with social media and other fintech services.
- Political Visibility – High‑profile involvement, such as that of Donald Trump Jr., may raise public awareness of prediction markets but also politicize the regulatory debate, potentially affecting legislative responses at both state and federal levels.
Key Takeaways
- Nevada’s civil complaint seeks to bar Kalshi from offering unlicensed sports‑event contracts, citing state gambling laws.
- Kalshi’s legal strategy hinges on federal jurisdiction, arguing that its products are commodity derivatives regulated by the CFTC.
- The Ninth Circuit’s decision removes a temporary block, allowing Nevada to proceed with its enforcement action.
- The CFTC has entered the fray with an amicus brief defending its exclusive authority over such markets.
- The case is part of a broader wave of state‑level challenges to prediction‑market operators, with potential ramifications for the entire sector’s regulatory landscape.
The resolution of Nevada’s lawsuit will be a bellwether for how prediction‑market platforms are treated across the United States, shaping the balance between innovation in decentralized finance and traditional state gambling oversight.
Source: https://cointelegraph.com/news/nevada-sues-kalshi-after-prediction-market-loses-bid-to-stop-state-action?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
