U.S. District Court Judge Andrew Gordon blocked the Nevada Gaming Control Board from taking action against KalshiEX LLC for its sports outcome contracts.
A U.S. District Court judge has blocked state gaming regulators from enforcing sports wagering laws against a New York company that offers “event-based contracts” that look like sports bets.
District Judge Andrew Gordon on Tuesday also granted KalshiEX LLC a preliminary injunction forbidding the Nevada Gaming Control Board and the Nevada Gaming Commission from prosecuting Kalshi for offering contracts in Nevada.
Kalshi, which says it is the first exchange regulated by the federal Commodity Futures Trading Commission, is dedicated to trading on the outcome of future events, usually with yes-or-no propositions.
While most of Kalshi’s publicly offered contracts address current events, others are clearly sports propositions. In March, Kalshi offered propositions on its website asking, “Will Trump eliminate the Department of Education this year?” and “The number of tornadoes this month will be higher or lower than 150.”
The company began offering sports propositions in January. The Kalshi site currently offers propositions involving professional golf’s 2025 Masters Tournament and which team will win the NBA basketball championship.
Kalshi reportedly handled $504 million in event contracts on college basketball during the NCAA’s annual March Madness tournament.
What’s next
It’s unclear what Nevada gaming regulators will do next.
In a text message, Control Board Chairman Kirk Hendrick said he could not address questions about whether the state would appeal or seek to address the matter at the federal level. Kendrick referred back to a March 31 statement he made: “The Nevada Gaming Control Board is dedicated to protecting all of Nevada’s residents and visitors. The NGCB will oppose any attempts to circumvent Nevada’s rights regarding gaming activities within its borders.”
In early March, the Control Board issued a cease-and-desist order to Kalshi, alleging that it was violating Nevada Revised Statutes as well as Control Board regulations 22 and 26B, setting a March 14 deadline to stop operating within the state.
“Presuming that Kalshi consulted with Nevada legal counsel, your company was undoubtedly advised that Nevada has a long and storied history of strictly regulating gaming activity,” Hendrick said in the initial cease-and-desist order. “Encompassed within such strict regulation is the requirement that a person must be licensed to operate a sports pool in Nevada. A sports pool is a person in ‘the business of accepting wagers on sporting events or other events by any system or method of wagering.’ A ‘sporting event’ is ‘an individual race, game, match or contest’ or any part of a series of those events.”
The Control Board also objected to Kalshi offering contracts on election outcomes in violation of state public policy.
Kalshi lawsuit
The company asked for a deadline extension, which the Control Board granted. But instead of shutting down by the new March 28 deadline, Kalshi instead filed its lawsuit against the state.
“Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges,” the company said in its lawsuit.
The lawsuit set the stage for Gordon’s hearing.
“Kalshi has met its burden of showing these factors, so I grant its motion and enjoin the defendants from pursuing civil or criminal prosecutions of Kalshi for event contracts Kalshi offers on its CFTC-designated exchange,” Gordon said in his Wednesday-dated written order which took effect at the conclusion of the Tuesday hearing.
“Under the (Commodities Exchange Act), the CFTC has exclusive jurisdiction to regulate commodities and futures on designated exchanges,” Gordon wrote.
In other words, the federal Commodity Futures Trading Commission regulations pre-empt state gaming regulations.
“I have no evidence that (at least thus far) the CFTC has taken action to prevent Kalshi from offering sports-based event contracts,” Gordon’s ruling said. “As a result, at this point in time, federal law allows Kalshi to offer both sports and election-based event contracts on its exchange.”
Regulators in five other U.S. states — New Jersey, Illinois, Maryland, Ohio and Montana — joined Nevada in filing cease-and-desist orders against Kalshi.
It’s unclear whether those jurisdictions would band together to pursue action against Kalshi.
