Nevada has just become the first state in the US to challenge the rapid rise of sports-based “event contracts” offered by platforms like Kalshi, Crypto.com and Polymarket.
The Nevada Gaming Control Board, the state’s gambling regulator, has asked Kalshi Inc. to stop offering derivatives trading on professional and college sports to users in the state by March 14.
Sites like Kalshi and Crypto.com have processed millions in sports contracts in the past couple of months, especially since they started taking wagers tied to the outcome of the Super Bowl.
Unlike the state-regulated online and in-person sports books, the prediction markets are regulated by the Commodity Futures Trading Commission (CFTC), which allows them to offer their products to young traders and sidestep individual state rules, taxes, age restrictions and other requirements.
Kalshi’s odds for words President Donald Trump was expected to say during his address to Congress on March 4, 2025. Source: Kalshi
Nevada Gaming Control Board issues cease-and-desist order to Kalshi
Nevada issued a cease-and-desist order to Kalshi on grounds that its contracts violated state rules for sports pools, which are required to be licensed, inspected and taxed, according to a March 4 press release posted on X.
The @NevadaGCB issued the following news release today. pic.twitter.com/uzQEwE2yy1
— Nevada Gaming Control Board (@NevadaGCB) March 5, 2025
“Any unlawful attempts to circumvent Nevada’s right to regulate gaming activity within its borders will be met with the full force of criminal and civil penalties,” the Nevada Gaming Control Board chairman Kirk Hendrick has said.
Nevada’s regulator has given Kalshi 10 days to “cease all unlawful activity” and notes that “criminal and civil penalties” may follow and “any future unlawful activity will be deemed willful violations.”
Whether or not Kalshi plans to comply with the state of Nevada’s request to stop offering its products in the state remains to be seen. However, non-compliance seems to be an option.
In the last days of the Biden administration, Crypto.com refused the CFTC when it demanded that it halt trading in its Super Bowl contracts to give the agency more time for review.
Bloomberg previously reported that Kalshi filled more than $70 million in contracts linked to about 150 sports markets since it began offering the product in January. About $27 million of that was centered on the Super Bowl, but Kalshi and Crytpo.com have since expanded beyond football to include soccer championships, NBA and NHL games, and golf.
Regardless of how Kalshi responds, Nevada has set a precedent for other states to follow. The traditional sports betting industry has seen massive growth since the 2018 US Supreme Court lifted a national ban.
Some form of sports gambling is now legal in 38 states and Washington D.C., and taxes on gaming operators are now considered an important source of revenue.
“The Nevada Gaming Control Board’s decisive action on Kalshi reinforces the significant concerns surrounding sports event contracts, including compliance and consistency with state laws,” Chris Cylke, the senior vice president of government relations for the American Gaming Association, wrote in an email.
The Nevada regulator said Kalshi’s election contracts also violate state rules. The derivatives products allow wagers on the outcome of nearly any sort of event. However, the highest stakes are found in sports.
Acting CFTC chair Caroline Pham has asked that companies provide additional information about whether their sports contracts align with its regulations and also plans to hold a panel to discuss possible regulation of event contracts more broadly.
How Kalshi has responded
Addressing the subject, a spokesperson for the site said in an email that “Kalshi is federally regulated by the CFTC,” adding that the platform has always been committed to a “regulation-first approach.” “We just received the NVGCB letter and the team is reviewing it,” they said.
In a statement given to Event Horizon, Kalshi expressed disappointment in the commission’s assessment, claiming it has always held the utmost respect for regulators and the regulatory process.
“We’ve been a federally regulated exchange for over four years and a federally regulated clearinghouse for about six months,” the statement continued. “We are proud to have paved the way for prediction markets to thrive in the U.S. We look forward to a swift resolution to this matter and to ensuring that Americans continue to have access to safe, regulated, and transparent prediction markets.”
The statement is ambiguous, especially regarding how Kalshi plans to proceed with the Nevada order and March 14 deadline.
As of Wednesday morning, “Kalshi remains fully operational in Nevada,” the company’s spokesperson Jack Such said, highlighting the company’s readiness to fight the verdict.
The outcome of the 2024 US elections introduced new leadership at the CFTC, which appears to be more receptive to Kalshi’s argument that their election, as well as sports-event contracts, should be considered lawful under the Commodity Exchange Act and relevant CFTC regulations, which prohibit markets on “gaming,” and to this point has been interpreted to apply to sports contests.
Kalshi may feel some confidence knowing it recently brought on Donald Trump Jr. as a “strategic advisor.” Current Kalshi board member and former CFTC commissioner Brian Quintenz is also poised to take over as the chairman of the CFTC.
On Election night at Mar-a-Lago, while biased outlets called the race a coin toss, my family and close friends used the prediction market @Kalshi to know we won hours ahead of the fake news media.
I immediately knew I had to contribute to their mission. Today, I am proud to…
— Donald Trump Jr. (@DonaldJTrumpJr) January 13, 2025
The CFTC requested that Kalshi discontinue offering sports markets during a formal review period that is now underway. To be held soon is a series of roundtable discussions between various stakeholders seeking to participate, including the American Gaming Association (AGA), California Nations Indian Gaming Association, Nevada Congresswoman Dina Titus, and the Indian Gaming Association (IGA), among many others.
Arguments made by the AGA and the IGA ask the ultimate question of whether or not federal law via the Commodity Exchange Act and the CFTC preempt state laws concerning gaming, specifically sports gambling.
Kalshi already won one court victory and now enjoys political clout thanks to Trump Jr. joining the team, so it probably has a plan to prove that its continued activity in Nevada is lawful. The situation is still developing but it is only the beginning and more drama is expected in the future when the CFTC decides whether or not sports-events contracts are lawful federally.
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