Nevada judge poised to reverse injunction protecting Kalshi from gambling regulations

A federal judge in Nevada said he is inclined to reverse an April order that shielded Kalshi from gambling enforcement by granting the prediction markets operator a preliminary injunction against the state's regulator.

The pending Nevada ruling on Kalshi's injunction has intensified the debate over whether prediction markets fall under federal derivatives supervision or state gambling authority, as courts across multiple states weigh similar challenges involving the Commodity Futures Trading Commission’s oversight.

US District Judge Andrew Gordon signaled during a hearing on Friday that he may reverse his April order that blocked Nevada regulators from pursuing enforcement against Kalshi, reports Bloomberg. Gordon said he is “leaning toward dissolving the injunction” and intends to issue a written decision within two weeks.

The judge questioned whether some of Kalshi’s sports-related contracts meet the legal standards for derivatives, noting, “It seems like your definition is so broad that pretty much anything can become a swap — anything can have a financial consequence.” He added, “Nobody thought sports bets were commodities or excluded commodities or swaps until some brilliant people at Kalshi.”

Kalshi sued Nevada regulators in March after receiving a cease-and-desist letter directing the company to stop offering what the state viewed as unlicensed gambling. However, the platform maintains that its event contracts are derivatives subject to federal regulation. 

In its lawsuit, Kalshi said: “Event contracts are a quintessential example of a derivatives contract—they are a type of option.” The company argues that because it is registered with the CFTC, its operations fall under federal jurisdiction rather than state gambling law.

The firm reiterated its position following the hearing. “We’re always happy to be heard in court and take the judge’s instruction to confer with the state seriously,” a spokesperson said. “In the meantime, we will continue to operate our national exchange in compliance with federal law.”

The Nevada dispute is one of several active cases involving Kalshi’s operations. Courts in more than a dozen states are considering related questions about the application of state gambling rules to event contracts.

In California last week, a judge denied a motion filed by three tribes seeking to restrict Kalshi’s activity on tribal lands, citing the CFTC’s authority and the Unlawful Internet Gambling Enforcement Act. A New Jersey judge previously granted a preliminary injunction blocking enforcement actions there.

In Maryland, a judge denied Kalshi’s request for an injunction. Additional cases are pending in Massachusetts, New York, and Ohio. Twenty-two Native American tribes, including the Seminole Tribe of Florida, submitted a brief supporting Ohio’s position. Massachusetts’ Suffolk County Superior Court is scheduled to hear the state’s injunction motion on Dec. 9.

Several states, including Arizona, Illinois, and Montana, have issued cease-and-desist letters to Kalshi.

State concerns are also extending to sportsbook operators. Nevada regulators advised licensed operators that offering sports event contracts could affect licensing status. DraftKings and FanDuel last week surrendered licenses and withdrew applications for sports betting in Nevada.