Nevada Sues Kalshi After Appeals Court Greenlights Action

The US state of Nevada has sued Kalshi after the prediction market company lost its court challenge to stop the state’s regulator from taking action over its sports prediction markets.

The US Court of Appeals for the Ninth Circuit on Tuesday denied Kalshi’s bid to stop Nevada’s gaming regulator from taking action on its sports event contracts, removing a block on the regulator launching a civil suit against the company.

After the decision, the Nevada Gaming Control Board promptly filed a civil enforcement action in state court against Kalshi, which it said sought to block the company “from offering unlicensed wagering in violation of Nevada law.”

Kalshi swiftly filed a motion to have the suit heard in a federal court, repeating its long-held argument that it is “subject to exclusive federal jurisdiction” under the Commodity Futures Trading Commission.

The appeals court order and subsequent lawsuit are a blow to Kalshi in its nearly year-long battle against Nevada to keep its sports contracts active in the state. The company and other prediction markets are facing multiple similar lawsuits from other states.

The company sued the state last year in March after receiving a cease-and-desist order to halt all sports-related markets within the state. In April, a federal court backed Kalshi’s bid to temporarily block Nevada from taking action amid court proceedings.

Kalshi did not immediately respond to a request for comment.

Nevada says Kalshi is flouting state law

In its latest lawsuit, the Nevada Gaming Control Board repeated its past claim that Kalshi’s sports event contracts meet the requirements to be licensed under state law, as they allow “users to wager on the outcomes of sporting events.”

Despite making wagers, sports betting and other gaming activities accessible in the State of Nevada, Kalshi is not licensed in Nevada and does not comply with Nevada gaming law, the regulator argued.

In its federal court motion, Kalshi argued that such a claim means the court “must adopt a narrow interpretation” of federal commodity exchange laws, which it asserts it is regulated under by the CFTC.

CFTC chair asserts jurisdiction over prediction markets

Earlier on Tuesday, CFTC chair Mike Selig said his agency filed an amicus brief backing Crypto.com in a similar lawsuit the crypto exchange had brought against Nevada.

Crypto.com had sued Nevada’s regulators in June after similarly receiving a cease-and-desist letter. It also appealed to the Ninth Circuit in November after losing a federal court motion to block the state from taking action.

Related: Crypto lobby forms working group seeking prediction market clarity

The CFTC argued in its brief to the Ninth Circuit that “states cannot invade the CFTC’s exclusive jurisdiction over CFTC-regulated designated contract markets by re-characterizing swaps trading on DCMs as illegal gambling.”