Kalshi is not having a very good week. On Tuesday, Arizona’s attorney general filed a 20-count criminal complaint against an online betting market, accusing it of running an illegal gambling business. Now, another southwestern state has made major changes to the company: A judge in Nevada has temporarily barred the utility from operating there as part of an ongoing court case brought by state regulators.
Nevada, on behalf of its Gaming Control Board, sued Kalshi in February in an attempt to block the betting site from operating. Officials maintain that Kalshi failed to obtain the proper gaming licenses to accommodate the type of betting activity its users do and that, by allowing users under the age of 21 to use its services, it violates state law.
Earlier this month, the state requested a temporary ban on Kalshi as part of the ongoing trial. In federal court Friday, Judge Jason D. Woodbury granted the state’s request and scheduled a hearing on the restraining order early next month, court documents said.
In his order, Woodbury wrote that Kalshi was not licensed under the Nevada Gaming Control Act and that, given Kalshi’s policy of taking a commission on contracts purchased through its system, it was apparently operating a “percentage game” (which the state defines as gambling).
Kalshi has argued that, because of its registration with the Commodity Futures Trading Commission, it is under the federal agency’s special regulatory domain, which should exempt it from state laws, court documents show. However, Woodbury noted that the issue of whether federal law overrides state law has not yet been settled, but the courts have not relied on that approach.
Kalshi declined to comment on the development when reached by TechCrunch. Wired first reported on the judge’s decision. Reuters reports that Nevada had previously convinced judges to ban Kalshi’s competitors such as Coinbase and Polymarket.
The Nevada case in which the betting market finds itself is one of a growing number of federal lawsuits across the country that seek to argue that sites like Kalshi and Polymarket are illegal gambling operations.
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On the other hand, current federal officials have positioned themselves as protectors of the forecasting industry. The bottom line: After Arizona’s decision to file criminal charges against Kalshi earlier this week, CFTC chairman Mike Selig came out against the decision, writing online: “Arizona’s Attorney General today filed criminal charges against one of our registered traders related to the futures markets. It is exploring its options.”
The increasingly hostile stance of state officials and the laxity of the CFTC have all but ensured a regulatory battle between the states and the federal government over the futures markets.
