Nevada Judge Signals Shift Against Kalshi

The Conflict Over Market Jurisdiction

The legal conflict pits Kalshi, a startup offering event contracts, against the Nevada Gaming Control Board (NGCB) and the Nevada Gaming Commission. The core issue is whether the state or the federal government has final authority over the rapidly growing predictive market sector.

Kalshi argues it is a derivatives exchange registered with the US Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA). This status, the firm claims, preempts state gambling laws.

Nevada regulators contend that Kalshi is operating an unlicensed sports betting scheme under the guise of being a federally regulated derivatives exchange, allowing the company to avoid state licensing and taxation. The Nevada Resort Association has also joined the state’s side in the suit.

Kalshi’s contracts allow users to buy “yes” or “no” positions on a wide range of future events. These include political outcomes or metrics like which artist will be most popular on Spotify. The present lawsuit focuses on contracts tied to sports outcomes, which regulators say closely resemble traditional sports wagers.

Judicial Stance Takes a Hard Turn

In April, Judge Gordon initially ruled in Kalshi’s favor. He issued a preliminary injunction that barred the two Nevada gaming commissions from pursuing civil or criminal action against Kalshi. This early ruling allowed the company to continue its operations in the state.

However, during a recent hearing, the judge’s position dramatically changed. Judge Gordon openly questioned the foundation of Kalshi’s argument that its products qualify as derivatives. “I will tell you, in all candor, I’m leaning toward dissolving the injunction,” Judge Gordon stated at the hearing’s close, signaling a likely reversal of his earlier order.

Dissolving the injunction would effectively stop Kalshi from offering predictive sports contracts in Nevada while the underlying lawsuit against the NGCB proceeds. The judge also urged Kalshi and the state to try to settle the dispute before he issues a final ruling.

Questions on the Definition of a Swap

Judge Gordon publicly challenged the breadth of Kalshi’s definitions for its products. He questioned whether some of the firm’s offerings even qualified as derivatives, a key legal point. “It seems like your definition is so broad that pretty much anything can become a swap—anything can have a financial consequence,” the judge noted.

The judge also cast doubt on the historical view of these products. He said, “Nobody thought sports bets were commodities or excluded commodities or swaps until some brilliant people at Kalshi.”

Further, Judge Gordon called it “absurd” that Congress intended for designated contract markets like Kalshi to “turn into nationwide gambling venues on any topic under the sun.”

This line of questioning indicates a significant move toward supporting Nevada’s regulatory position. A similar distinction on whether a contract relates to an “event” versus an “outcome” was a factor in the judge denying a preliminary injunction to Crypto.com in a related case in October. That ruling denied the Crypto.com firm a similar court protection against state action.

Implications for Regulation and Next Steps

Nevada regulators and the Nevada Resort Association have raised specific concerns about Kalshi’s non-licensed operation. They worry that operating without a license and paying no gaming taxes gives Kalshi an unfair advantage over licensed operators. Regulators also fear that firms like Kalshi, without the standard state oversight, offer sports betting with fewer protections against underage and problem gambling.

Judge Gordon stated he will issue a formal ruling on the injunction within two weeks. The judge has encouraged both parties to attempt a compromise by November 24th. If a settlement is not reached, court hearings to resolve the main lawsuit are scheduled to start next month.

Legal experts widely anticipate that this high-stakes regulatory conflict may ultimately need a decision from the Supreme Court of the United States.