Nevada vs. Kalshi: Legal Battle Over Prediction Markets and State Gambling Laws

The ongoing legal battle between the state of Nevada and the prediction market platform Kalshi has reached a critical juncture. Nevada has officially filed an opposition to Kalshi’s request to delay a Ninth Circuit rehearing. The platform had hoped to pause proceedings until the Commodity Futures Trading Commission (CFTC) published revised rules, potentially shifting the regulatory landscape in its favor. However, Nevada’s legal team remains firm, asserting that state-level gambling oversight is not subject to the technical whims of federal agencies.

Kalshi’s primary objective has been to classify its sports-event contracts as financial derivatives, specifically swaps. This classification would place the platform under the exclusive jurisdiction of the CFTC, effectively bypassing the rigorous gambling regulations imposed by individual U.S. states. In a letter dated September 25, Kalshi requested that the court either grant its petition for a rehearing en banc or hold the petition until the CFTC updates Section 40.11 of its regulations. The agency is expected to release these revisions within the next two months.

Numbers and facts

Nevada is unimpressed by this proposed timeline. Attorney Nicole Saharsky of Mayer Brown argued in the filing that the court was already aware of the CFTC’s intent to revise its provisions when it issued its previous decision. From Nevada’s perspective, the timing of a revision does not change the statutory basis of the ruling. In August, a three-judge panel of the Ninth Circuit ruled that Kalshi could not block Nevada gaming regulators from overseeing its platform. The court concluded that the Commodity Exchange Act (CEA) likely does not preempt state gaming laws.

Economic stakes are high for the Silver State. During previous hearings, it was noted that gaming revenue accounts for approximately one-third of Nevada’s general fund. Any erosion of regulatory authority by platforms like Kalshi or Crypto.com could lead to significant financial shortfalls. Meanwhile, the CFTC has submitted two proposed rules to the White House Office of Information and Regulatory Affairs. One aims to define swaps to include event contracts, while the other would explicitly exclude casino-style gambling products from federal oversight.

Background

The Kalshi case is part of a broader national trend. In the separate case Blue Lake Rancheria v. Kalshi, the Ninth Circuit ruled that the CEA does not authorize sports betting on tribal lands. Furthermore, the 6th U.S. Circuit Court of Appeals recently issued a unanimous ruling against Kalshi. Circuit Judge Julia Smith Gibbons wrote that Kalshi failed to prove its sports-event contracts were swaps typically governed by the CFTC. Even if they were, the court found that the CEA does not override state gambling laws in Ohio and Tennessee.

"The ruling shows exactly why a state-by-state patchwork doesn't work. Courts can't agree on the basics: Some say federal law covers these contracts, and others say it doesn't." - Kalshi Spokesperson

The dispute also carries political weight. While 44 states signed a letter in July urging the CFTC to stay out of sports-related event contracts, there is support for these markets within Donald Trump’s inner circle. Donald Trump Jr. serves as an advisor to platforms like Polymarket and Kalshi, and Trump Media is reportedly launching its own prediction service, Truth Predict. This creates a complex dynamic between state regulators and federal interests.

Why it matters for German players

For users in Germany, these developments serve as a reminder of the volatility of international prediction markets. Under the German Interstate Treaty on Gambling 2021 (GlüStV 2021), any entity offering sports betting or similar event-based wagering must hold a license from the Gemeinsame Glücksspielbehörde der Länder (GGL). Prediction markets disguised as financial products would struggle to gain legal status in Germany without adhering to strict sports betting frameworks. Players should be aware that platforms lacking a GGL license offer no legal protection. The German system includes strict limits, such as a 1,000 Euro monthly deposit cap and a 1 Euro per spin limit for slots, all monitored via the LUGAS system. Accessing U.S.-based platforms like Kalshi puts German players in a legal gray area without the safety net of national regulation.

What it means for GGL-licensed casinos

Licensed operators in Germany can view this U.S. legal conflict as a validation of their regulatory model. The GGL whitelist ensures that providers operate transparently and pay relevant taxes. While the U.S. suffers from a "patchwork" of conflicting rulings across New Jersey, Ohio, and Nevada, the German market offers legal certainty through centralized oversight in Halle an der Saale. Any attempt by prediction markets to enter the German space would immediately face the hurdles of the GlüStV 2021. For licensed casinos, the U.S. debate underscores that the boundary between financial markets and gambling remains one of the most complex legal issues globally, with Germany taking a leading role in strict enforcement.