Kalshi Challenges Nevada’s Cease-and-Desist Orders Over Prediction Markets
The legal landscape for online prediction markets is being challenged by state regulations in Nevada and New Jersey against Kalshi, which offers sports contracts. Key points include:
- Nevada and New Jersey issued cease-and-desist orders to Kalshi, claiming violations of state gambling laws.
- Kalshi argues it operates under the Commodity Futures Trading Commission (CFTC) as a regulated prediction market, not as a gambling venue.
- Crypto attorney Aaron Brogan believes Kalshi will likely win the legal disputes based on the Commodity Exchange Act (CEA).
- Prediction markets like Kalshi do not operate as sportsbooks, acting instead as neutral intermediaries matching buy/sell orders.
- Sports prediction has become a significant growth area, surpassing volume from the 2024 election in some cases.
- Kalshi self-certified its event contracts with the CFTC, allowing it to list new products without explicit pre-approval.
- The CFTC acknowledges that outcomes of sports games can be considered commodities, distinct from traditional betting.
- Nevada's actions could raise questions about the legitimacy of its own gambling markets, potentially leading to federal preemption over state authority.
- A victory for Kalshi could reshape American sports betting culture, favoring prediction markets over traditional gambling companies.
- The outcome may prompt states to seek changes politically or legally, challenging the CFTC’s authority.
This situation highlights a critical federalism issue regarding state versus federal regulatory control in the digital age.