(The Center Square) – The Nevada Gaming Commission this week sued a multi-billion dollar company as the latest predictions market drama unfolds on the national stage.
States across the country have been back-footed by the swift takeover of prediction markets in the gambling world. Nevada’s latest lawsuit positions the state among the most aggressive in search of regulations in the nation.
The lawsuit filed against Kalshi in Carson City District Court on Tuesday by the Nevada Gaming Commission is a civil enforcement action to legally block the company’s operations in the state. The document largely acted to further a federal decision from November to stop the company from offering sports contracts, but has since been appealed by the company.
“Despite conducting gaming accessible in the State of Nevada, Kalshi is not licensed in Nevada and does not comply with Nevada gaming law,” Jessica Whelan, chief deputy solicitor general for the attorney general’s office, wrote in support of a court emergency filing.
The Nevada lawsuit came just one day after the chairman of the Commodity Futures Trading Commission, which federally regulates Kalshi and other prediction markets, wrote an op-ed in support of prediction markets.
“The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products,” CFTC Chairman Michael Selig wrote in the Wall Street Journal Monday.
The gaming commission’s battle with prediction markets in Nevada started with a cease-and-desist letter in March, which sparked the ongoing series of legal actions over their place in Nevada’s more than $30 billion gaming industry.
Across the country, states are in court with prediction markets. Massachusetts has emerged as one of the early leaders in regulation of the new form of gambling, with an impending court order set to ban Kalshi, worth $11 billion according to its own website, from the state in March.
“A lot of states are bucking this because they say, ‘Well, this is actually not a financial market, it’s actually a gambling platform,’” Richard Warr, a finance professor at North Carolina State University, told The Center Square. “The states are claiming the right to regulate gambling within their state.”
Prediction markets are regulated by the CFTC because they qualify as financial markets, with Kalshi having successfully argued to the federal government that their users are not gambling, but staking investments.
But roughly 90% of Kalshi’s trading volume comes from sports bets, according to a New York Times report.
Back in Nevada, the state gaming commission disagreed with the CFTC, arguing Kalshi offers gambling on its site and should therefore follow state gaming regulations and taxes.
“Its continued operation harms the state and the public every day and poses an existential threat to the state’s gaming industry,” Whalen wrote in the court document.
Even if Nevada and its strong gaming industry succeed in keeping Kalshi and other prediction markets out of the state legally, some question how that would look in practice.
The relatively easy access to virtual private networks, or VPNs, mean online access to Kalshi and other prediction markets can happen outside of their legal boundaries.
“ With fairly simple technology you can bypass a geographical location,” said Warr. He added later, “It seems tricky how you can regulate it.”