Kalshi suffers legal setback as Nevada gets power to regulate
What's the story
Kalshi, a popular prediction market platform, has suffered a major setback in its legal battle against the state of Nevada. The 9th US Circuit Court of Appeals has rejected Kalshi's plea to prevent Nevada from regulating its platform. The ruling comes months after Nevada's gambling regulators and attorney general sued Kalshi in February for allegedly operating without a sports betting license.
Ongoing litigation
Legal challenges in multiple states
The legal challenges against Kalshi aren't limited to Nevada. Connecticut's attorney general has also accused the platform of running an unlicensed sports betting operation and is seeking to ban it in the state.
However, another federal court ruled earlier this year that New Jersey lacked jurisdiction over Kalshi.
Rhode Island, New York, and Arizona are also pursuing legal action against the prediction market platform.
Jurisdictional debate
Regulatory gray area for prediction markets
The ongoing legal battles highlight a lack of regulatory clarity over prediction markets.
The question remains whether states or the US Commodity Futures Trading Commission (CFTC) should have the final say on these platforms.
The CFTC has even sued three states that attempted to regulate Kalshi and Polymarket independently, adding to the confusion surrounding this rapidly growing industry.
Court ruling
Federal appeals court rejects Kalshi's argument
The federal appeals court in Nevada has rejected Kalshi's legal argument that only its federal regulator should have jurisdiction over its platform.
This is the second major federal court ruling on this issue, but they have taken opposing stances, creating a legal divide.
The panel of judges from the US Court of Appeals for the Ninth Circuit unanimously disagreed with Kalshi's argument that Nevada regulators don't oversee its business.
Regulatory compliance
'Sports event contracts weren't 'swaps' because they are sports bets'
The court ruled that the Commodity Exchange Act (CEA) likely doesn't preempt Nevada's gaming regulations as applied to Kalshi's sports event contracts.
The judges disputed that these activities qualify as "swaps" trades under the CFTC's jurisdiction.
They clarified, "the sports event contracts were not 'swaps' because they were sports bets."
This ruling further complicates the regulatory landscape for prediction markets in the US.
Company statement
Kalshi responds to ruling
In response to the ruling, Kalshi spokesperson Dani Lever said, "The Ninth Circuit agreed with the Third Circuit on a fundamental point: Federal law prevents states from regulating trading on a federally licensed exchange, like Kalshi."
Lever added that despite this opinion, they still believe CFTC regulations do not prohibit sports contracts and will seek further review.