Last month, the Nevada Gaming Control Board issued a cease-and-desist letter against trading platform Kalshi from operating in the Silver State. However, a recent federal court ruling has sided with the derivatives trading market operator and granted a temporary injunction against the regulators.
Kalshi Wins Round 1
Chief Judge Andrew Gordon of the U.S. District Court for the District of Nevada partially granted Kalshi’s request for a temporary restraining order and preliminary injunction against state gaming regulators, like the Nevada Gaming Control Board, seeking to prohibit trading platforms from offering sports events contracts.
“If an entity, such as Kalshi, directly makes use of Nevada gaming, i.e., sports pools, in its business model without possessing a gaming license, a big hole is created in Nevada’s regulatory structure,” the Nevada side argued in its response to Kalshi’s lawsuit. “Nevada’s legislature has carefully crafted the law in this state to ensure that every aspect of gaming-related activity is regulated and conducted with integrity and consumer protections.”
Kalshi has been served cease-and-desist orders from Nevada, Maryland, Ohio, Illinois, New Jersey and Montana. However, this recent ruling will allow Kalshi and others like it to continue to offer sports trading contracts wherever they choose, at least for the time being.
“Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges,” the company said in the lawsuit filed on March 28.
Murky Market
Controversy and confusion continue to swirl around the boundaries in which prediction market trading platforms like Kalshi can operate. Specifically, the platforms’ sports events contracts that operate much like sportsbooks, offering odds and lines on any team or individual sport.
Nevada’s economy relies on the gaming industry to make it run, and allowing a non-regulated entity to operate without paying taxes to the state government prompted the Nevada Gaming Control Board to issue a cease-and-desist order to Kalshi last month.
“Every sports pool in Nevada must undergo an extensive investigation prior to licensing, must adhere to strict regulation once licensed, and must pay all applicable taxes and fees,” NGCB Chairman Kirk Hendrick said in a statement. “Any unlawful attempts to circumvent Nevada’s right to regulate gaming activity within its borders will be met with the full force of criminal and civil penalties.”
The order also stated that any prior violations are subject to criminal and civil penalties, while adding, “Future unlawful activity will be deemed willful violations.”
Not Your Typical Bet
Kalshi and other trading platforms like it operate in a slightly different way than sportsbooks in that they offer contracts with prices that are dynamic rather than fixed, like the ones from sportsbooks. Customers can buy those contracts at the prevailing price, which may be lower or higher than the initial price based on the current score of the game or match.
Unlike a sportsbook, Kalshi does not act as the house but rather as a trading platform between sellers and buyers, much like the stock market or derivatives trading of silver, gold, or any number of commodities. Kalshi is simply using sports event contracts in the same way it would offer pork bellies on the derivatives market.
This distinction has allowed Kalshi to win rulings at the federal level, allowing it to operate unfettered throughout the United States without regulatory approval or licensing from the states’ gaming agencies.
Kalshi Scores a Victory
The governing body that oversees trading platforms, the Commodity Futures Trading Commission, initially opposed Kalshi and others from venturing outside its traditional purview, but a higher court overturned the initial favorable ruling to the CFTC and sided with Kalshi.
The CFTC has changed board members with the Trump administration, and the body is seen as more welcoming to trading platforms offering sports events contracts. However, the issue has not been permanently resolved, and more court decisions are expected in the future.
