The First Judicial District Court of Nevada delivered a jarring ruling to prediction market titan Kalshi, which will halt the company’s ability to offer entertainment, political, and, most importantly, sports event contracts in the Silver State for at least two weeks.
Not in Nevada
Kalshi has been battling with state gaming regulators across the nation, but the Nevada Gaming Control Board (NGCB) has been more successful than most.
The streak continued, as evidenced by a temporary restraining order (TRO) granted against Kalshi, which will keep the prediction market out of commission in Nevada for 14 days, with more legal battles on the horizon.
April 3rd is the date scheduled for a new hearing. At the very least, this victory for the NGCB represents a potential setback for all prediction markets seeking to continue offering sports event contracts nationwide under the federal jurisdiction of the Commodity Futures Trading Commission.
Nevada Gaming Control Board Chairman Mike Dreitzer said in a press release, “Kalshi has repeatedly stated that its operations are legal in 50 states, which is clearly not true. Prediction markets, to the extent they facilitate unlicensed gambling, are illegal in Nevada, and we have a statutory duty to protect the public. We want people in the state to wager safely at a licensed book.”
Is the Tide Turning?
Kalshi and other prediction markets that continue to trade in sports event contracts have drawn the ire of state gaming authorities, as they do not have to follow their state regulations, nor must they pay taxes on money earned in that state from those sports event contracts. They have argued that they are shielded from those obligations due to their status as a licensee of the CFTC and its federal oversight, which supersedes the states’ authority.
But although that legal argument was successful in the early rounds, lately it has experienced setbacks, none more concerning than this recent legal blow in Nevada. State regulators contend that prediction markets are cannibalizing the mobile sports betting market, and the gaming industry is the lifeblood of the Nevada economy.
“The Board continues to vigorously fulfill its obligation to safeguard Nevada residents and gaming patrons and uphold the integrity of a thriving gaming industry,” Dreitzer said last month in a press release announcing the filing of its civil enforcement action.
However, it appears as though the CFTC will be neutral no longer, as the newly installed chairman, Michael Selig, has begun to vocalize his position on the prediction markets’ ability to offer sports event contracts, and he has been clear that he believes his licensees have every right to do so.
“The most common allegation is that these contracts are a form of gambling and therefore subject to state laws,” CFTC chair Michael Selig wrote in an op-ed last month. “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.”
