Nevada is the first state to make a move against event trading markets, as the Silver State’s sports betting regulators have taken action on Kalshi.
The Nevada Gaming Control Board issued a cease-and-desist order Tuesday to KalshiEX LLC, requiring the company to stop offering prediction markets akin to Nevada sports betting by March 14. The order said Kalshi violates Nevada law despite event trading being legal at a federal level, regulated by the Commodity Futures Trading Commission.
“Every sports pool in Nevada must undergo an extensive investigation prior to licensing, must adhere to strict regulation once licensed and must pay all applicable taxes and fees,” NGCB Chairman Kirk Hendrick said in a statement. “Any unlawful attempts to circumvent Nevada’s right to regulate gaming activity within its borders will be met with the full force of criminal and civil penalties.”
The NGCB had no further comment when reached by LSR.
Nevada unregulated sports betting
The NGCB notified Kalshi that its “event-based contracts” violate Nevada law. It detailed multiple Nevada Revised Statutes and Nevada Gaming Commission regulations the company is in violation of.
Regulated and licensed sportsbooks in Nevada are not allowed to offer event-based markets, according to an NGCB release. It said past violations are subject to criminal and civil penalties, while “future unlawful activity will be deemed willful violations.”
Because of its strong gambling history, Nevada has long been a leader in policing unlicensed activity within its borders.
Event trading markets
Crypto.com and Kalshi kicked off sports event trading by offering markets on the Super Bowl. Crypto did so without CFTC approval and declined the agency’s request to halt it before approval.
Kalshi submitted its intention in January. Robinhood, the retail trading app, is looking to offer the markets, as well.
Kalshi took off with its offering of presidential election markets. The CFTC initially denied the company’s request to offer election markets before allowing them in October 2024.
Event trading under microscope
Lawmakers are looking at potentially banning the election markets. However, that could be a steep uphill climb in Washington, as Donald Trump Jr. is now a member of the Kalshi board, and President Donald Trump nominated Kalshi board member Brian Quintenz as CFTC chairman. Quintez previously served in the position under Trump during his first term.
Last month, the CFTC announced it would hold a prediction markets roundtable following a public comment period.
“This roundtable is a necessary first step in order to establish a holistic regulatory framework that will both foster thriving prediction markets and protect retail customers from binary options fraud such as deceptive and abusive marketing and sales practices,” acting Chair Caroline Pham said in a release. “The CFTC appreciates the proactive engagement from market participants and looks forward to working together to support innovation while ensuring robust customer protection in our markets.”
At least 18 entities sent letters to the CFTC about prediction markets, many of them negative, including 10 from tribal groups. The American Gaming Association also submitted feedback.
