Kalshi is not having a good week. On Tuesday, the attorney general of Arizona filed a twenty-count criminal complaint against the online prediction market, accusing it of running an illegal gambling business. Now, another southwestern state has taken action. A judge in Nevada has temporarily banned the service from operating there as part of an ongoing court case brought by state regulators.
Nevada, on behalf of its Gaming Control Board, sued Kalshi in February in an effort to block the prediction site from operating. Officials maintain that Kalshi has failed to acquire the appropriate gaming licenses for its betting activity and that, by allowing users under the age of twenty-one, it violates state law. Earlier this month, the state requested a temporary restraining order. In a state court on Friday, Judge Jason D. Woodbury granted the request and scheduled a hearing on the restraining order for early next month.
In his order, Woodbury wrote that Kalshi was not licensed under the Nevada Gaming Control Act. He noted that, given Kalshi’s policy of taking a commission from contracts purchased through its system, it was clearly operating what the state defines as a gambling percentage game.
Kalshi has argued that its registration with the Commodity Futures Trading Commission places it under that federal agency’s exclusive regulatory domain, which should exempt it from state laws. However, Woodbury noted that the issue of whether federal law overrides state law is still unsettled, and the courts have not been leaning in that direction. Kalshi declined to comment on the development.
The Nevada case is one in a growing number of state cases across the country that argue sites like Kalshi are illegal operations skirting state gambling laws. Conversely, current federal officials have positioned themselves as protectors of the prediction industry. Following Arizona’s decision to file criminal charges against Kalshi earlier this week, the CFTC’s chairman, Mike Selig, publicly criticized the decision. He stated it was a jurisdictional dispute and entirely inappropriate as a criminal prosecution, adding that the CFTC is watching closely and evaluating its options.
The increasingly hostile posture of state officials and the lenience of the CFTC have all but guaranteed a regulatory battle between states and the federal government over the future of prediction markets.