Nevada says North Carolina‘s prediction market tax undercuts the argument Kalshi made against state oversight of its federally regulated exchange.
Nevada argues Kalshi cannot support North Carolina taxing its prediction market operations while maintaining that federal law preempts states from regulating its event contracts. It raised the argument in a filing with the Ninth Circuit Court of Appeals, where Kalshi is challenging the state’s authority to apply its gaming laws to prediction markets.
Nevada Deputy Atty. Gen. Abigail Pace argued Kalshi’s support is admission that states have some authority over its operations.
“A stunning about-face, which would mean that (at a minimum) Kalshi cannot evade Nevada’s taxing provisions,” Pace wrote.
Nevada calls out Kalshi tax stance
At issue is North Carolina SB 257, a budget bill signed into law last month that imposes a 6% tax on prediction market net trading fee revenue attributable to customers in the state beginning Jan. 1.
The law also recognizes the Commodity Futures Trading Commission‘s exclusive federal regulatory authority over sports event contracts offered by federally registered exchanges, without requiring those exchanges to obtain additional state gaming licenses.
Kalshi supports that distinction. The company’s position is that exclusive CFTC jurisdiction prevents states from regulating trading on federally designated contract markets but does not prevent them from taxing revenue generated from that activity.
“Kalshi attempts to draw a distinction between regulating its contracts and taxing its revenue from these contracts, but that is purely a formalism,” Pace wrote. “Both are forms of regulation by the state.”
Major tax implications
States have historically regulated and taxed legal sports betting within their borders.
North Carolina, for example, taxes licensed sportsbooks at 23% of gross wagering revenue, compared with the 6% tax on net trading fee revenue it will collect from prediction markets.
Kalshi maintains that its event contracts are federally regulated derivatives under exclusive CFTC jurisdiction, rather than gambling products subject to individual state gaming laws, a position the agency itself has aggressively defended with lawsuits of its own.
State regulators have increasingly challenged that position as prediction markets expand their sports offerings. Nevada has been among the most aggressive, while other states have pursued lawsuits, cease-and-desist orders and other efforts to assert their authority over the contracts.
