Kalshi Files Lawsuits In Nevada, New Jersey In Response To Cease-And-Desists
Prediction market platform Kalshi filed lawsuits against the Nevada Gaming Control Board and the New Jersey Department of Gaming Enforcement on Friday night in response to the regulators’ cease-and-desist letters earlier this month.
Kalshi also asked for a temporary restraining order in the US District Court for the District of Nevada to prevent enforcement of the C&D.
At publication, The Event Horizon can only confirm that a lawsuit had been filed in the US District Court for the District of New Jersey. It names NJDGE Interim Director Mary Jo Flaherty as the defendant.
Nevada and New Jersey assert that some of Kalshi’s markets — including sports event trading — are being offered illegally in their states. Kalshi currently operates sports event trading in all 50 states.
Nevada is “unconstitutionally threatening to prohibit all trading of Plaintiff KalshiEX LLC’s event-based contracts in Nevada" Kalshi argues in one of the filings. “The Board’s attempt to regulate trading on a federally regulated exchange is preempted by federal law.”
More from Kalshi’s filings:
This action challenges the state of Nevada’s intrusion into the federal government’s “exclusive” authority to regulate futures derivatives trading on exchanges overseen by the Commodity Futures Trading Commission (“CFTC”). 7 U.S.C. § 2(a)(1)(A). Two Nevada agencies are seeking to prevent Plaintiff KalshiEX LLC (“Kalshi”) from offering certain event contracts for trading on its federally-regulated exchange. Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges. Nevada law is both field-preempted and conflict-preempted. This Court should therefore issue both a preliminary and a permanent injunction, as well as declaratory relief to that effect.
Attorney Dan Wallach first reported the existence of the lawsuit.
Background and timeline
Kalshi started offering prediction markets for US elections in October after winning a federal court case against the Commodity Futures Trading Commission.
Kalshi began offering sports events trading/peer-to-peer sports betting in January.
The NGCB sent the cease-and-desist on March 4.
Kalshi asked Nevada for an extension to respond, which was granted, on March 14.
Kalshi launched single-game betting markets for college basketball last week.
Soon after, Kalshi announced a partnership with Robinhood to offer college basketball trading/betting.
New Jersey issued a cease-and-desist similar to Nevada’s on Thursday, with a deadline of tonight at midnight to respond.
Robinhood stopped offering college basketball markets in New Jersey on Thursday night.
What Kalshi argues in the complaint
Some excerpts from the Nevada complaint and request for a temporary restraining order:
The Commodity Exchange Act (“CEA”) establishes a comprehensive federal framework for regulating commodity futures trading. The CEA explicitly and unambiguously delegates the “exclusive” power to oversee, approve, and regulate futures trading on registered exchanges to a federal agency—the CFTC. 7 U.S.C. § 2(a)(1)(A). In establishing a comprehensive federal an immediate temporary restraining order and framework for regulating commodity futures trading, Congress sought to prevent the “chaos” that would result from subjecting futures trading to a patchwork of conflicting state laws.
Kalshi argues it needs a restraining order to prevent irreparable harm:
But immediate action is required to avoid irreparable harm to Kalshi, its representatives, and its users. As described in more detail in the attached declaration, without immediate relief, Kalshi will incur irreparable harm no matter how it chooses to respond to the Board’s unconstitutional demand. If Kalshi chooses not to comply, the company and its representatives face the prospect of civil and criminal liability. But if Kalshi bows to the Board and attempts to comply, it will incur massive and irrevocable economic costs, impose significant harms on users with investments on the platform, imperil its federal registration, and undermine the public’s confidence in the integrity of its platform.
Emphasis added:
The CEA provides that the CFTC “may”—but need not—deem event contracts contrary to the public interest if they “involve”:
(I) activity that is unlawful under any Federal or State law;
(II) terrorism;
(III) assassination;
(IV) war;
(V) gaming; or
(VI) other similar activity determined by the Commission, by rule or regulation, to be
contrary to the public interest.”
Also of note in the filings:
Kalshi says it has 10,000 users in Nevada.
Some background on the CFTC and sports event contracts: “In contrast to the action it took with regard to congressional control contracts, the CFTC declined to review Kalshi’s sports-related contracts. Unless and until the CFTC takes action on Kalshi’s sports-related contracts, they remain authorized under federal law. Several other federally-regulated exchanges began listing sports-related event contracts around the same time period. In response, the CFTC exercised its power to commence review of a sports-related event contract offered by NADEX/crypto.com—a designated contract market that the CFTC certified under the name HedgeStreet in 2004. The CFTC initiated its 90-day review period of the sports-related contracts on January 14, 2025. The Commission requested that NADEX/crypto.com suspend its sports-related contracts during the pendency of the review. But the CFTC never made a similar request to Kalshi.”
The CFTC never asked this of Kalshi. The CFTC are overseen by the Congressional Agriculture Committee. This is arguably the worst committee to have final say here.
When CME Group was testifying against a Bitcoin Exchange, the committee members stated that they were just simple farmers.
I don’t trust those “simple farmers” would be able to spot the problem with Kalshi exploiting protections. I would trust a real simple farmer to know that this is illegal gambling.