A federal judge in Nevada has ruled that Kalshi must comply with the state’s gaming regulations, lifting a stay that had barred any enforcement actions against the prediction market operator.
The ruling has created a critical juncture in the ongoing conversation concerning whether contracts related to events, traded on federal commodities exchanges, fall under the domain of states’ gambling regulatory powers.
The ruling has led directly to an appeal, ensuring that the battle between states and prediction market operators will continue.
Chief US District Judge Andrew P. Gordon concluded that Kalshi’s sports-based event contracts do not fall within the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction under the Commodity Exchange Act.
He found the contracts to be wagers tied to sporting outcomes rather than swaps or other derivatives, which are regulated federally.
The court held that Kalshi’s interpretation of the law would improperly expand commodities jurisdiction into an area historically governed by states, particularly Nevada.
He added that Kalshi’s position would disrupt longstanding federalism principles by removing sports wagering from state oversight.
Judge Gordon determined that Nevada regulators had presented sufficient new legal and factual developments to revisit the earlier injunction.
He cited federal court decisions that had recently struck down similar preemption claims, and the fact that the scope of events offered by Kalshi had increased to include contracts similar to prop bets, on relatively minor occurrences events within sports matches.
Overreaching ambiguity
The order finds that an expansive reading of the statute would mean anything that has a financial effect on an event could be considered a federal derivative.
The court also found that permitting Kalshi to continue offering sports-event contracts in Nevada would undermine the state’s comprehensive regulatory system.
Nevada authorities argued that the company’s products were functionally sports bets offered without a gaming licence, a characterisation the court noted was consistent with Kalshi’s own marketing.
Judge Gordon concluded that the balance of hardships weighed against maintaining the injunction.
Any financial impact to Kalshi could be mitigated through geofencing, and federal regulators had not suggested that complying with state law would jeopardise its contract-market designation.
Nevada, by contrast, demonstrated potential harm to its regulatory structure and gaming industry if unlicensed wagering were allowed to proliferate.
The ruling highlights the state’s position that offering such contracts to individuals under 21, or without the consumer protections required of licensed operators, would threaten public welfare and established policy.
Kalshi filed a notice of appeal the following day, sending the matter to the US Court of Appeals for the Ninth Circuit.
The company seeks to overturn the decision and preserve its ability to operate in Nevada without being regulated as a gaming operator.
Battle presents challenges for other operators
The appeal is expected to be a major test of how federal courts interpret the Commodity Exchange Act in relation to emerging event-based markets, especially as similar disputes progress in other circuits.
Despite Kalshi’s efforts to appeal, the Nevada Gaming Control Board has issued a public notice on the matter.
The regulator announced it would vigorously oppose any attempt to delay enforcement of state law.
It also confirmed that it had reached agreements with Robinhood and Crypto.com to halt the listing of new sports-event contracts within Nevada during ongoing litigation.
According to the Board, Kalshi declined to reach a similar agreement, leaving the company responsible for complying with Nevada’s gaming statutes while its appeal proceeds.
The Board reiterated that sports and other event-based contracts constitute wagering under Nevada law, regardless of whether they appear on a federally regulated exchange.
It warned that Nevada licensees partnering with unlicensed operators, or offering comparable contracts in other jurisdictions without proper authorisation, could face disciplinary measures.
DraftKings and FanDuel, as well as other sportsbooks, have already committed themselves to the prediction markets space. The two have also announced their intended departure from Nevada’s regulated sports betting market as a result.