Nevada Cites Kalshi’s North Carolina Tax Compliance to Undermine Preemption Claims in Ninth Circuit Appeal
TL;DR — Nevada’s AG argues Kalshi’s acceptance of North Carolina’s 6% tax under SB 257 admits state regulatory authority, weakening its Ninth Circuit preemption case. NC codified CFTC oversight without extra licenses, unlike Illinois’ July 1 tiered tax (1.75%-3.5%) and $15M four-year sports betting license that Kalshi is also suing over.
SCCG Take — States are asserting taxing and licensing power over prediction markets despite CFTC registration, forcing operators into fragmented compliance rather than uniform federal treatment.
Nevada’s attorney general’s office has told the Ninth Circuit Court of Appeals that Kalshi’s acceptance of a tax on trading revenue in North Carolina represents an admission that states hold power to regulate its operations.
In papers filed Thursday, Nevada Deputy Attorney General Abigail Pace described the move as “a stunning about-face, which would mean that (at a minimum) Kalshi cannot evade Nevada’s taxing provisions.” Under the North Carolina state budget signed by Governor John Stein, prediction market operators face a 6% tax on trading fee revenue attributable to state residents. The tax takes effect January 1.
North Carolina became the first state to codify CFTC oversight into law via Senate Bill 257, allowing federally regulated exchanges to operate legally without a separate state gaming license or additional regulatory burden. The 6% rate contrasts with the 23% tax on gross wagering revenue faced by sports-betting operators in the state.
Pace wrote that the law “confirms the central holding … that states have the authority to regulate (Kalshi’s) sports, election, and entertainment-related event contracts.” She argued Kalshi’s embrace of the measure undercuts its field preemption and conflict preemption positions at every turn, including claims that the Community Exchange Act leaves no room for state supplementation on DCM transactions. Distinctions between contract regulation and revenue taxation amount to “purely a formalism,” according to the filing.
Parallel Developments in Illinois
Effective July 1, Illinois imposed a tiered transaction tax under Senate Bill 3019 on sports-related exchange wagers placed on prediction markets. The tax applies at 1.75% for the first five million wagers and 3.5% thereafter. Operators must obtain a state sports-betting license, with a four-year license costing $15 million. Kalshi has sued Illinois to overturn the tax.
The two-page filing was first reported by gaming attorney Daniel Wallach on LinkedIn, as reported by CDC Gaming. Kalshi did not immediately respond to a request for comment.
Reporting: CDC Gaming
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
Paying a state tax can become evidence against your federal preemption claim — every compliance decision now carries litigation risk.
We're watching the regulatory foundation of prediction markets get fought over in real time. Kalshi's willingness to pay North Carolina's 6% tax is now being weaponized by Nevada to argue states can regulate federally approved markets. Operators face a minefield: comply state-by-state and undermine your federal shield, or refuse and get shut out.
- Nevada AG tells Ninth Circuit that Kalshi paying NC's 6% tax proves states have regulatory authority
- North Carolina's SB 257 imposes tax but no extra license; Illinois demands $15M license plus tiered tax
- Every state compliance move now becomes legal ammunition in the preemption fight
SCCG angle: SCCG works both sides of this fragmentation. We help prediction market operators build state entry strategies that balance compliance with litigation posture, and we connect traditional gaming operators to the regulatory architects and trading infrastructure partners defining this emerging vertical before the map is fully drawn.
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