Court in Nevada Prolongs Kalshi Restrictions, Dismisses Derivatives Argument
Nevada's judicial system maintains constraints on Kalshi operations after dismissing the company's derivatives classification argument, escalating tension between state and federal prediction market oversight.
According to reports, a Nevada judge has prolonged a prohibition that stops Kalshi from making event-based contracts available to state residents, determining that these products represent unauthorized gambling activities according to state regulations.
During a Friday hearing held in Carson City, Judge Jason Woodbury indicated his intention to approve a preliminary injunction sought by the Nevada Gaming Control Board, which would prohibit the company from permitting state residents to participate in trading activities related to outcomes in categories including sports competitions, political elections, and entertainment-related events without obtaining the necessary gaming license, as reported by Reuters.
This ruling prolongs a temporary restraining order that was originally issued on March 20, which is set to stay in force until April 17 as the court works toward establishing more permanent limitations.
The New York-headquartered company Kalshi has maintained that its contracts should be classified as financial derivatives, more specifically as "swaps," which would place them under the sole regulatory authority of the Commodity Futures Trading Commission (CFTC).
Woodbury Finds Kalshi Offerings Equivalent to Sports Wagering
According to Reuters, Woodbury dismissed Kalshi's position, stating that a clear parallel exists between conventional sports wagering and what Kalshi's platform provides. The judge indicated that making a wager through a legally licensed sportsbook and purchasing a contract linked to the outcome of a sporting event are essentially identical in nature, the report states.
"No matter how you slice it, that conduct is indistinguishable,"
the judge was quoted as saying, further noting that this type of activity meets the definition of gaming according to Nevada's legal framework and therefore cannot be provided without appropriate licensing credentials.
This case represents the first instance where a state government has successfully obtained a court-enforced prohibition that is currently active against the company.
In the previous month, legislators in Utah also approved legislation that specifically targets both Kalshi and Polymarket by categorizing proposition-style wagers on in-game occurrences as gambling activities, with the goal of preventing such services from operating within the state.
CFTC Commits to Judicial Defense of Prediction Market Jurisdiction
The CFTC has claimed regulatory authority over prediction markets, with Chairman Michael Selig issuing a warning that the agency stands ready to protect its jurisdiction through court proceedings against any opposition from state governments or other regulatory bodies.
During remarks at an industry conference held last month, Selig described prediction markets as potential "truth machines," making the case that when market participants invest actual money to support their perspectives, these markets have the capability to generate more transparent and dependable indicators regarding future occurrences compared to conventional opinion surveys and polling methods.