Kalshi Battles Nevada in Landmark Case Over Federal vs. State Authority
Kalshi, a platform that offers prediction markets on events like sports and elections, is mounting a legal challenge against efforts by Nevada regulators to restrict its operations. The company argues that federal law supersedes state regulations when it comes to its business model.
Federal Law at the Center of Kalshi’s Defense
At the heart of the dispute is Kalshi’s claim that the Commodity Exchange Act (CEA)—which governs futures trading at the federal level—preempts state gambling laws. Kalshi is registered with the Commodity Futures Trading Commission (CFTC) and contends that only the CFTC has the authority to determine the legality of its contracts.
Nevada’s Attorney General previously moved to dismiss Kalshi’s lawsuit, asserting that Kalshi’s markets violate state gambling statutes. In response, Kalshi pushed back, saying the state’s position undermines constitutional principles that give the federal government control over interstate commerce, including financial markets.
Kalshi cited the Supreme Court’s decision in Murphy v. NCAA to support its argument, stating that Congress has the power to regulate sports betting nationally. While Kalshi’s interpretation of the ruling was partially inaccurate, the company maintained that its legal reasoning—that federal oversight takes precedence—remains intact.
A Case with National Impact on Prediction Markets
Legal experts believe this case could significantly influence how prediction markets are regulated across the United States. Ryan Rodenberg, a professor at Florida State University, noted that Kalshi’s legal team is relying heavily on a federal preemption argument, pointing to their status as a CFTC-approved exchange. He also highlighted Kalshi’s bold use of the Murphy case to emphasize federal authority.
Kalshi also referenced a recent preliminary injunction that temporarily blocked Nevada from taking legal action against it. The company criticized the state’s motion to dismiss, saying it ignored the injunction and restated arguments that had already been rejected by the court.
Additionally, Kalshi accused Nevada officials of misinterpreting the relationship between state and federal law, suggesting the state’s reliance on procedural arguments signals weak legal footing. A similar legal battle is unfolding in New Jersey, where Kalshi secured another preliminary injunction.
The outcomes of these cases could set important legal precedents for how prediction markets operate across state borders and may shape the regulatory landscape for years to come.
- SCCG Management. The Gambling Industry’s Global Connector. Access Here.
- Source: SCCGManagement.com
