Kalshi faces temporary ban in Nevada amid legal pressure

On Friday, Judge Jason D. Woodbury granted a temporary restraining order against Kalshi, temporarily banning the online prediction market from operating in Nevada. The decision comes as part of an ongoing court case initiated in February, when the Nevada Gaming Control Board sued the company. In his order, Judge Woodbury wrote that Kalshi is not licensed under the Nevada Gaming Control Act. He asserted that because Kalshi takes a commission from contracts purchased through its system, it is operating a “percentage game” (which the state defines as gambling).

The legal setback in Nevada follows action in another southwestern state. On Tuesday, the Arizona attorney general filed a 20-count criminal complaint against Kalshi, accusing the company of running an illegal gambling business. Meanwhile, the Nevada Gaming Control Board has argued that Kalshi failed to acquire appropriate gaming licenses in Nevada and violates state law by allowing users under the age of 21 to use its services. These cases are part of a broader trend across the country, where state regulators argue that platforms like Kalshi and Polymarket are illegal operations that skirt state gambling laws.

Kalshi has argued that its registration with the Commodity Futures Trading Commission (CFTC)—the US federal agency that regulates derivatives and prediction markets—places it under the federal agency’s exclusive regulatory domain, exempting it from state laws. However, Judge Woodbury noted that the issue of whether federal law overrides state law is unsettled for now. Conversely, federal officials have positioned themselves as protectors of the prediction industry. Following the Arizona complaint, Mike Selig, the CFTC’s chairman, criticized the state’s action, stating: “The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and entirely inappropriate as a criminal prosecution. The @CFTC is watching this closely and evaluating its options.”

Why it matters

The increasingly hostile posture of state officials and the lenience of the CFTC have all but guaranteed a regulatory battle between states and the federal government over prediction markets and their future.