UPDATE: Nevada’s Attorney General has just filed a motion requesting a federal judge to compel prediction market operator Kalshi to provide a comprehensive set of internal communications and documents. This urgent move aims to determine whether Kalshi’s sports event contracts comply with Nevada law.
The request comes as part of an escalating legal battle, with Nevada officials asserting that Kalshi’s operations may violate state gaming regulations. The US District Court for the District of Nevada is now tasked with deciding on this critical matter as both sides present their arguments.
Nevada’s legal team emphasized in their motion that they require vital evidence about how Kalshi structures and administers its contracts. They are particularly focused on the company’s discussions with the Commodity Futures Trading Commission (CFTC) and its chair nominee Brian Quintenz. The state is also seeking detailed information about Kalshi’s market makers and the businesses involved in its operations within Nevada, including lobbyists and marketing firms.
This push for discovery follows Kalshi’s assertion that the dispute revolves around the interpretation of the law, arguing that federal regulations supersede Nevada’s gaming laws, which they claim renders further fact-finding unnecessary. However, Nevada officials countered, stating that without access to Kalshi’s internal data, they cannot verify claims about the potential impact on the company’s survival if forced to halt operations in the state.
Nevada’s lawyers accused Kalshi of attempting to limit fact-gathering while presenting evidence that supports its request for a quick ruling, potentially ending the case before it reaches trial. They challenged Kalshi’s claim that the discovery process would be overly burdensome, especially given the company’s recent valuation of $2 billion following a funding round in June.
The dispute first erupted in March 2023 when the Nevada Gaming Control Board issued a letter instructing Kalshi to cease operations, alleging that the firm was engaging in unlicensed sports betting and election-based contracts in the state. In response, Kalshi initiated a lawsuit, contending that the Commodity Exchange Act grants the CFTC exclusive authority over its products. Following this, Kalshi secured a temporary court order in April allowing it to continue operations in Nevada pending a final decision.
Legal arguments presented by Nevada assert that federal law does not override state gaming regulations. Officials maintain that longstanding police powers empower Nevada to regulate gambling activities within its borders.
As this legal battle unfolds, the court has yet to make a decision regarding Nevada’s request for information or Kalshi’s motion for an expedited ruling. The outcome of this case could set a significant precedent for how prediction markets that offer sports-related products navigate state gaming laws.
Stay tuned for more updates as this story develops, as the implications for Nevada’s gaming industry and Kalshi’s future operations are immense.
