Key Highlights
- Kalshi accuses Nevada’s gaming regulator of breaking federal law over $120,000 in daily penalties.
- Nevada investigators placed nine trades on Kalshi after the geofencing deadline.
- Kalshi is also facing legal challenges from New York and Baltimore over prediction-market contracts.
Prediction market platform Kalshi has accused Nevada’s gaming regulator of violating federal law after the state sought $120,000 in daily penalties over the company’s alleged failure to block Nevada users from trading certain contracts.
The dispute is the latest clash between Kalshi and U.S. regulators over whether prediction markets should be treated as federally regulated financial products or state-regulated gambling.
Nevada investigators test Kalshi’s geofencing
According to a Reuters report, investigators with the Nevada Gaming Control Board successfully placed nine trades on Kalshi while connected to cellular networks in Nevada.
The trades happened one day after a court-ordered deadline for Kalshi to have a complete geofencing system in place. Nevada then sought penalties of $120,000 for each day Kalshi allegedly remained out of compliance.
Geofencing uses a user’s location to restrict access to certain services. For Kalshi, the technology is important because Nevada has sought to prevent residents from trading certain event contracts without a state gaming license.
Kalshi says it followed Nevada’s requirements
Kalshi said it had already taken steps to meet the requirement. The company said it hired GeoComply, a location-checking company licensed by Nevada’s gaming regulator, at the state’s request. The company also said it kept the regulator updated while working on the system.
Kalshi Chief Regulatory Officer Rick Heaslip said on X that the company had “went above and beyond to geofence Nevada as requested.” Heaslip said Kalshi hired a state-approved vendor and kept the regulator informed, but accused Nevada investigators of using false information to find a way around the company’s blocking system.
He also said the issue was fixed within hours, but Nevada still took the matter to court. He further criticized the regulator’s actions, saying they were not about protecting consumers and instead amounted to a “vindictive waste of taxpayer dollars at the bidding of casinos.”
Kalshi pushes back against the penalties
Kalshi’s lawyers have challenged the way Nevada investigators tested the platform. The company alleged that the investigators misrepresented their residences to Kalshi and that at least one investigator found a way around the company’s own blocking system. Kalshi said those actions violated federal law.
The dispute follows an April decision by a Nevada judge that issued a preliminary injunction blocking Kalshi from offering certain contracts in the state without a gaming license. The case has become part of a wider fight over prediction markets, which allow users to trade contracts based on events rather than buying or selling traditional assets.
Kalshi faces more state-level legal pressure
Nevada is not the only state challenging Kalshi’s sports-related prediction markets.
Recently, Baltimore sued Kalshi and Polymarket over sports-related contracts offered to residents.
The city argues that contracts based on game winners, point spreads, total points, tournament results, and player statistics work much like bets offered by online sportsbooks. Baltimore says the platforms should therefore follow state gambling rules, including licensing, taxes, and responsible-gambling protections.
New York has also taken legal action against Kalshi. Governor Kathy Hochul and Attorney General Letitia James filed a case on July 31, accusing the company of running an unlicensed gambling business. The state is seeking to stop Kalshi from operating in New York and is also seeking restitution, disgorgement, and other penalties. Kalshi has not been found liable, and the claims remain allegations before the court.
At the same time, the New York City Council is looking at how prediction-market companies promote their products. Its inquiry involves Kalshi, Polymarket, Coinbase, and Gemini Titan and focuses on possible deceptive or abusive marketing, including concerns about advertising aimed at young people. The Council said its investigation does not decide whether prediction markets are gambling.
The CFTC steps into the dispute
The federal side has also entered the fight. On August 11, the Commodity Futures Trading Commission (CFTC) used emergency authority to order the company to continue operating under the Commodity Exchange Act’s core principles.
That leaves Kalshi facing pressure from several U.S. states while also relying on its federal regulatory status. For now, the Nevada dispute continues to focus on one key question: whether Kalshi can legally offer its event contracts in the state without following Nevada’s gaming rules.
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