LAS VEGAS (KTNV) — A federal judge has sided with Nevada gaming regulators and ruled against Kalshi's sports event contracts.
On Friday, Judge R. Nelson issued an opinion rejecting Kalshi's argument that the contracts they offer customers are protected law under the Commodity Exchange Act, or CEA.
"For Kalshi to deny that its sports event contracts are sports bets under a reasonable person's understanding is disingenuous," Nelson wrote. "Placing sports bets, even when called by another name, is still gambling. Kalshi users can effectively place prop bets, bet the point spread, bet a specific score, or create a several-leg parlay. And the payout depends on the performance of a sports team or a player."
Kalshi also argued that because it operates a federally regulated Designated Contract Market, federal law overrides state law. However, the Ninth Circuit disagreed.
"Nevada is not attacking the CFTC's [Commodity Futures Trading Commission's] action or inaction but pursuing enforcement of its own state law about what qualifies as a bet or wager, not what the CFTC considers a swap," Nelson wrote. "The CEA's scheme is not as expansive as Kalshi would like."
According to the opinion, the Ninth Circuit feels CFTC's current rules bar contracts involving gaming, which are still legally binding, and Kalshi's sports contracts likely violate them.
Back in June, Nevada gaming regulators asked the court to punish Kalshi, claiming the company was violating court orders that ban event contracts in Nevada. However, in July, both sides reached an agreement where Kalshi agreed to put geofencing in place by Aug. 12, 2026, to prevent anyone in the State of Nevada from placing trades in violation of the preliminary injunction.
Earlier this month, I told you that attorneys for state gaming regulators argued Kalshi was not in compliance by Aug. 12. It's something that attorneys representing Kalshi denied.
Kalshi has continuously stated that Nevada gaming regulators are doing the bidding of casinos. However, the Nevada Gaming Control Board has repeatedly stated they are trying to protect tax dollars, with gaming taxes helping fund things like public education, better roads, better housing, and Medicaid.
Gaming taxes bring in about $1.1 billion per year.
As for what happens next, Kalshi must stop offering sports contracts in Nevada. However, the Ninth Circuit did not address election contracts, with the issue being remanded back to district court.
According to the American Gaming Association, there are 21 states and nine out of 12 U.S. federal circuits have active litigation against prediction markets like Kalshi and Polymarket. The issue is expected to make its way up to the U.S. Supreme Court next year.
National gaming experts are also warning parents about how prediction markets are reaching young people and confusing them about what is and isn't legal sports betting.
"There has been reporting on prediction market platforms going to fraternities on college campuses and paying fraternity brothers to participate in recruiting their fellow students to sign up and gamble on these prediction market sites and the more of their fellow students that they get to sign up, the more money they get paid," Trace York, testifying on behalf of the American Gaming Association, told the Joint Interim Standing Committee on Revenue earlier this week. "A lot of the influencers that they have been paying to advertise online have been found to be under the age of 18. And so, this would never be allowed in states. It's completely preposterous that they're even allowed to do this. I think it clearly shows you the type of quote-unquote regulation that is going on right now, which is very little."
Nevada Gaming Control Board Chair Mike Dreitzer also testified telling lawmakers there are also money laundering protections, customer requirements, problem gambling, patron dispute resolution, and insider betting.
"One thing we do know, in the State of Nevada, is that when someone risks their money at a casino or another licensed establishment, they are getting the opportunity for a fair wager," Dreitzer said. "I think that the news reports of the various events that have occurred, the cheating that has occurred as it pertains to prediction markets is quite clear and there's no protection or very limited protection in that regard."
I reached out to Kalshi and the Nevada Gaming Control Board to see if either side would like to comment on the ruling. As of the time this story was published, I have not heard back.
