Kalshi Takes Legal Action Against Nevada, New Jersey Regulators

Posted on: March 31, 2025, 01:43h. 

Last updated on: March 31, 2025, 01:49h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • Prediction markets operator believes it’s protected under Commodities Exchange Act
  • Kalshi is seeking immediate injunctive relief in the states after regulators issued cease-and-desist letters

Prediction markets giant Kalshi has filed suits against the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (NJDGE) over its ability to offer sports event contracts in those states.

Kalshi
A Kalshi advertisement. The company is suing Nevada and New Jersey regulators. (Image: Kalshi)

The move comes after those regulators issued cease-and-desist letters to Kalshi with the most recent arriving in New Jersey last week when the NJDGE told the company and partner Robinhood to halt offering the derivatives on the NCAA basketball tournaments. In legal filings, Kalshi made clear it is regulated by the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA), which covers derivatives such as event contracts.

The Board’s attempt to regulate trading on a federally regulated exchange is preempted by federal law. As the CFTC informed the DC Circuit just a few months ago, ‘due to federal preemption, event contracts never violate state law when they are traded on a [designated contract market]’ like Kalshi,” according to the company’s suit against the NGCB brought in US District Court, District of Nevada.

Earlier this month, the NGCB told Kalshi to halt operations in the state on the grounds that it hasn’t been approved by the Nevada Gaming Commission (NGC) to offer political or sports contracts in the state. New Jersey’s order against the prediction markets firm differs in that it focuses explicitly on sports contracts with some of the NJDGE’s claims hinging on the fact that March Madness markets that were to be offered on Robinhood violated state law because the Garden State prohibits wagering on college athletic events taking place there.

Kalshi Says it Faces ‘Irreparable Harm’

In seeking immediate temporary restraining orders against the NGCB and the NJDGE, Kalshi claims the regulators are overstepping their constitutional bounds by forcing the company to leave or limit how it conducts business in the states.

The Nevada and New Jersey actions differ in that the former essentially said it wants Kalshi out of the state, though it granted the company an extension to pursue legal remedies, whereas the latter appears more focused on the competitive threat sports event contracts could pose to traditional sportsbook operators. In Kalshi’s eyes, those situations amount to the very state-by-state regulation Congress was looking to avoid when it made exchanges overseen by the CFTC federally regulated.

New York-based Kalshi also contends that the Nevada and New Jersey cease-and-desist orders box it into a corner whereby compliance and defiance are similarly unattractive options.

“Kalshi will incur irreparable harm no matter how it chooses to respond to the Board’s unconstitutional demand. If Kalshi chooses not to comply, the company and its representatives face the prospect of civil and criminal liability,” according to the Nevada filing. “But if Kalshi bows to the Board and attempts to comply, it will incur massive and irrevocable economic costs, impose significant harms on users with investments on the platform, imperil its federal registration & undermine the public’s confidence in the integrity of its platform.”

Kalshi Could Have Vulnerabilities

Kalshi’s prediction markets are expansive as clients can buy contracts on economic data releases, financial market outcomes, pop culture, and even the weather in some cities. However, it’s the company’s political and sports contracts that have struck chords with regulators in some states.

Before the 2024 presidential election — an event that brought prediction markets to the forefront of the betting conversation — Kalshi won a federal ruling allowing it to offer yes/no contracts on the election. Domestic sportsbook operators are prohibited from taking wagers on political bets.

When it comes to defending its ability to offer sports event contracts, Kalshi could encounter difficulties because the company previously argued those derivatives lack consistency under the CEA. Legal analyst and gaming attorney Daniel Wallach said that point won’t be lost on Nevada and New Jersey regulators.

“Kalshi could be barred by the doctrine of judicial estoppel from asserting that ‘event contracts’ tied to sporting event outcomes are allowed under federal law when it previously told two different federal courts — within just the last year — that such contracts are inconsistent with the Commodity Exchange Act’s text and legislative history,” he wrote in a LinkedIn Post.