Kalshi Sues Nevada Regulators Over Event-Based Trading Dispute

Kalshi, a New York-based financial exchange that specializes in event-based contracts, has sued Nevada gaming regulators questioning their right to control its operations. KalshiEX LLC has filed a case in US District Court in Nevada asking for a permanent order to stop state officials from meddling in its business.

Kalshi Defends Federal Oversight as Nevada Challenges Its Operations

Kalshi operates under the watch of the federal Commodity Futures Trading Commission (CFTC). It lets people trade on real-world events. Users can make yes-or-no predictions about politics, weather patterns, and sports results. However, the Nevada Gaming Control Board (NGCB) has some concerns. They think these contracts look a lot like regular sports betting, which state law controls.

The fight got worse after NGCB Chairman Kirk Hendrick wrote to Kalshi executives on March 4. He said the company’s products might be breaking Nevada’s gambling rules. The board especially did not like contracts about election results. They argued that these fell under sports betting laws. They also pointed out that Kalshi did not have a license to run a sportsbook in the state.

Kalshi fights back claiming its platform is a recognized exchange under federal law and falls under the CFTC’s sole jurisdiction. The company says Nevada’s attempt to control its activities messes with the regulatory system set up by the US Congress. The lawsuit filed last Friday targets several key state officials, including Attorney General Aaron Ford, Gaming Commission Chair Jennifer Togliatti, and multiple members of the NGCB and Nevada Gaming Commission.

Kalshi’s Lawsuit Could Reshape Event-Based Trading Rules

While Kalshi deals with big-picture social and economic topics, the sports-related contracts have regulators worried. Some of its recent offerings asked questions about the NCAA basketball tournament and how likely certain policy changes were under former President Donald Trump.

Nevada’s gaming regulators told Kalshi to stop operating in the state. The company did not follow the order right away. Instead, they asked for more time to answer and then decided to go to court. Kalshi claims in its lawsuit that the CFTC can decide if its contracts are legal. They want the court to stop Nevada officials from using state gambling laws against them.

Both sides are sticking to what they believe. This case might change how people view event-based derivatives in places with tough gambling laws. So far, Nevada authorities have not said anything about the lawsuit. Similar legal proceedings have been initiated by Kalshi in New Jersey.