Kalshi sues Nevada regulators over cease-and-desist order on event-based trading contracts

New York firm KalshiEX LLC, which offers futures contracts on real-world events, has filed a federal lawsuit against Nevada gaming authorities, alleging state regulators are unlawfully attempting to police a business model governed by federal law.

KalshiEX, a federally regulated exchange that facilitates trading in event-based contracts, filed suit in the U.S. District Court in Nevada on Friday, seeking a permanent injunction against the Nevada Gaming Control Board, the Nevada Gaming Commission, and Nevada Attorney General Aaron Ford.

The company claims that Nevada's intervention violates the authority of the Commodity Futures Trading Commission (CFTC), the federal body that oversees Kalshi’s operations.

“Nevada’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating futures derivatives on designated exchanges,” the company stated in its complaint. Kalshi describes itself as the first exchange regulated by the CFTC dedicated to offering contracts on future events, typically framed as yes-or-no questions. 

Examples of recent contract offerings include, “Will Trump eliminate the Department of Education this year?” and “The number of tornadoes this month will be higher or lower than 150?” Kalshi has also listed contracts on sports-related topics, such as which teams would advance to the NCAA basketball tournament semifinals.

On March 4, Nevada Gaming Control Board Chairman Kirk Hendrick sent a letter to Kalshi, warning that the company’s offerings bore a strong resemblance to sports betting, a regulated activity in Nevada that requires licensure. 

Hendrick also flagged contracts tied to election outcomes as a regulatory concern. Citing potential violations of Nevada Revised Statutes and state gaming regulations, Hendrick argued that Kalshi’s business, as it stands, would qualify as operating a sports pool without a license.

After Nevada issued a cease-and-desist order, Kalshi executives requested additional time to respond. The state granted the request, setting a Friday deadline, which Kalshi met by filing the lawsuit.

“Kalshi is a federally designated and approved derivatives exchange, subject to the CFTC’s exclusive jurisdiction,” the complaint argues. “It offers consumers the chance to invest in many types of event contracts, including, as relevant here, political-outcome contracts and sports-outcome contracts. These contracts are subject to extensive oversight by the CFTC, and, critically, they are lawful under federal law.”

The single-count lawsuit asserts that Congress gave the CFTC exclusive authority over futures markets and asks the court for both declaratory relief and a preliminary and permanent injunction to prevent further state interference.

Alongside Attorney General Ford and Chairman Hendrick, the lawsuit names Gaming Control Board members George Assad and Chandeni Sendall, and Nevada Gaming Commission Chair Jennifer Togliatti, along with commissioners Rosa Solis-Rainey, Brian Krolicki, George Markantonis, and Abbi Silver.