Kalshi Challenges Nevada's Authority Over Event-Based Contracts

New York-based financial exchange KalshiEX LLC has initiated legal proceedings against Nevada gaming regulators, asserting that state authorities are overstepping their jurisdiction by attempting to regulate its operations. The lawsuit, filed in the U.S. District Court in Nevada, seeks a permanent injunction against the Nevada Gaming Control Board (NGCB), the Nevada Gaming Commission, and Attorney General Aaron Ford. Kalshi argues that Nevada’s intervention conflicts with the federal framework established by Congress for the oversight of futures derivatives exchanges.

Kalshi, which operates under the jurisdiction of the federal Commodity Futures Trading Commission (CFTC), facilitates trading on real-world events through yes-or-no contracts. These event-based contracts allow s to speculate on a wide range of outcomes, including political elections, economic trends, and sports results. However, Nevada regulators contend that Kalshi’s offerings bear a strong resemblance to traditional sports betting, which is regulated under state law and requires proper licensing.

Nevada’s Concerns Over Betting-Like Contracts

The dispute intensified when NGCB Chairman Kirk Hendrick sent a letter to Kalshi on March 4, warning that some of its contracts might be in violation of Nevada’s gaming regulations. In particular, regulators flagged event-based contracts tied to election outcomes and sports results, arguing that these offerings mirrored conventional sports wagers, which require a state-issued license to operate legally.

Following this warning, Nevada issued a cease-and-desist order demanding that Kalshi halt operations within the state. The board expressed concerns that Kalshi was effectively running a sportsbook without securing the necessary approvals. Instead of complying immediately, Kalshi requested additional time to respond to the directive. After evaluating its legal options, the company filed a lawsuit last Friday, asserting that its operations fall exclusively under federal oversight and should not be subject to state regulations.

Kalshi insists that the CFTC has sole regulatory authority over its platform and that Nevada’s attempt to interfere disrupts the regulatory structure established by Congress. In the lawsuit, Kalshi states, “Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges.”

The company claims to be the first federally regulated exchange dedicated to trading event-based contracts. Kalshi asserts that its offerings, which are structured as investment opportunities rather than gambling activities, are lawful under federal statutes. Recent contract examples include predictions on the likelihood of policy changes under former President Donald Trump, weather-related events, and the results of NCAA basketball tournaments.

Lawsuit Targets Key Nevada Officials

Kalshi’s legal action specifically names several key Nevada officials, including Attorney General Aaron Ford, Gaming Commission Chair Jennifer Togliatti, NGCB Chairman Kirk Hendrick, and multiple of both the Gaming Control Board and the Gaming Commission. The lawsuit seeks both declaratory relief and a permanent injunction to prevent any further state intervention in its business operations.

Kalshi argues that its platform was established within the legal framework designated for futures markets and should not be subjected to Nevada’s gaming laws. The outcome of this case could have broader implications for event-based trading and the regulatory authority of individual states over federally governed financial exchanges.

Currently, the Nevada Attorney General’s Office has declined to comment on the pending lawsuit.

Source:

Kalshi sues Nevada, New Jersey gaming boards after receiving orders to cease sports contracts, theblock.co, March 29, 2025.