Nevada gaming regulators say Kalshi LLC’s derivatives exchange looks too much like sports betting and is illegal, so the New York company has sued the regulators.
The New York company that offers “event-based contracts” that look like sports bets has sued Nevada gaming regulators for threatening to curtail its investment business.
KalshiEX LLC is seeking a permanent injunction against members of the Nevada Gaming Control Board and Nevada Gaming Commission and Attorney General Aaron Ford with its lawsuit in U.S. District Court in Nevada.
A representative of the Nevada Attorney General’s Office had no comment on the lawsuit.
“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 filed Friday.
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.
In a March 4 letter to Kalshi executives, Gaming Control Board Chairman Kirk Hendrick said Kalshi’s futures derivatives contracts closely resembled sports bets. The board also objects to contracts referencing the outcome of elections.
Hendrick cited potential violations of Nevada Revised Statutes as well as Regulations 22 and 26B in the letter, saying the contracts offered by Kalshi resembled sports wagers and the company is not licensed in Nevada to operate a sports pool.
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.”
But it also asked participants to consider which teams would reach the semifinals of the NCAA men’s and women’s basketball tournaments.
“Kalshi is a federally designated and approved derivatives exchange, subject to the CFTC’s exclusive jurisdiction,” the lawsuit says. “It offers consumers the chance to invest in many types of event contracts, including, as relevant here, political-outcome contracts and sports-outcome contracts. These contracts are subject to extensive oversight by the CFTC, and — critically —they are lawful under federal law.”
But Hendrick said Kalshi’s derivatives exchange can be considered a form of sports betting under Nevada law. After the state issued a cease-and-desist order to Kalshi, the company’s executives asked for more time to respond to the order.
Regulators gave the company until Friday to respond — and it did, with the lawsuit filing.
In the single-count lawsuit, Kalshi said Congress gave the CFTC “exclusive jurisdiction” to regulate futures trading on approved exchanges. It asks the court to impose a declaratory judgment for a preliminary and permanent injunction.
In addition to Ford and Hendrick, the lawsuit named fellow Control Board members George Assad and Chandeni Sendall, Nevada Gaming Commission Chair Jennifer Togliatti and commissioners Rosa Solis-Rainey, Brian Krolicki, George Markantonis and Abbi Silver.
