The Nevada Gaming Control Board has filed a class action action lawsuit against prediction markets giant Kalshi on Tuesday. The state gaming regulator, in its lawsuit, claimed that Kalshi is offering financial betting services related to sports in the state without completing the appropriate licencing work.
Nevada v/s Kalshi
The Nevada Gaming Control Board has reiterated that Kalshi’s sports event contracts enable users to bid on the potential outcomes of different sports — which makes it eligible to first obtain the necessary licences in the state.
The lawsuit urges the court to have Kalshi and its affiliates restrict the operation of any “derivatives exchange and prediction market that offers event-based contracts relating to sporting and other events without obtaining all Nevada gaming licences.”
Sports lawyer Daniel Wallach shared screenshots of the lawsuit on X.
Kalshi, on the other hand, argues that it falls under federal jurisdiction overseen by the Commodity Futures Trading Commission (CFTC) — giving it the operational access across the country. Kalshi has been locking horns with the Nevada gaming regulator for a year to keep its services operational in the state.
Nevada’s crackdown on prediction market platforms created legal challenges for Polymarket as well this month.
As reported by the Guardian, at least 20 federal lawsuits have been filed against prediction markets in the U.S. highlighting the lack of regulatory clarity on if these platforms be treated as financial exchanges under federal regulations or as gambling platforms that will need to comply with state regulations.
CFTC to the rescue
Owing to the plethora of lawsuits embroiling prediction markets in legal battles with U.S. state regulators, the CFTC has decided to step in as a testimony to President Donald Trump’s support to the emerging sector.
CFTC chairperson Michael Selig posted a statement on Wednesday addressing the situation.
“Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit,” Selig noted.
The statement from the CFTC mentioned that it has been officially recognizing event contracts since 1992 after which in 2008 the Congress expressly granted the CFTC comprehensive authority over any such contract based on a commodity.
The CFTC has filed an amicus brief in the U.S. Circuit Court of Appeals for the Ninth Circuit confirming its exclusive jurisdiction over prediction markets.