Nevada federal judge Andrew Gordon denied Kalshi’s motion for a stay in Nevada, which has been one of the rare legal defeats for the leader in the prediction market industry.
Request Denied
The legal tide may be shifting against Kalshi and other prediction market platforms, just as mobile sports betting powerhouses DraftKings, FanDuel, and Fanatics have collaborated with major derivative market players to form their own prediction platform brands.
In a reversal of fortune, Nevada federal judge Andrew Gordon dealt Kalshi a blow to their standing in the Silver State, which may set a precedent in others. Kalshi had been granted a preliminary injunction to continue operating in the nation’s gaming mecca, but now that the injunction has been dissolved, Kalshi’s claims for a permanent ruling in their favor may have also vanished.
Judge Sides With State Gaming Regulators
Nevada judge Andrew Gordon was the first federal judge to side with state gaming regulators in November when he wrote, “Kalshi has established a market for sports betting. Kalshi advertised that it is the ‘first app for legal sports betting in all 50 states.’ But Kalshi is not licensed to conduct gaming in Nevada or any other state.”
Kalshi then filed a stay to continue operating in Nevada, but earlier this week, the same judge maintained his position and was not swayed to reverse course. Nevada gaming regulators had issued a cease-and-desist letter to Kalshi earlier this year, warning the company that it would be subject to criminal prosecution if it continued offering sports event contracts.
Court Weighs Merits and Public Interest
In November, Judge Gordon wrote in his initial ruling, “I dissolve the injunction because the (Nevada Gaming Control Board) has shown that Kalshi is not likely to succeed on the merits, although there are serious questions on the merits. The Board also has shown that the balance of hardships does not tip sharply in Kalshi’s favor. Rather, the balance of hardships tips in favor of the Board, and the public interest favors dissolving the injunction.”
More Legal Battles Await
Kalshi will likely file a stay with the U.S. Court of Appeals for the Ninth Circuit, but that will take several weeks to be heard. Moreover, now that a federal judge has, not once, but twice, ruled against Kalshi, it could be an ominous indication for prediction markets operating in other states.
Judge Gordon’s summation of his ruling may influence judges in other jurisdictions. He wrote the following:
“Kalshi now contends that it is not taking sports bets and, even if it were, no state can regulate it because it is a DCM under the CFTC’s exclusive jurisdiction. Kalshi relies on a strained reading of the already convoluted Commodities Exchange Act in an attempt to evade state regulation. Kalshi’s interpretation would require all sports betting across the country to come within the jurisdiction of the CFTC rather than the states and Indian tribes. That interpretation upsets decades of federalism regarding gaming regulation, is contrary to Congress’s intent behind the CEA, and cannot be sustained,” Gordon wrote.
Should other rulings side against Kalshi and Crypto.com, then we could soon see the demise of prediction platforms offering sports event contracts.
