As legal battles continue across the US related to prediction markets, Kalshi appears likely to see one of its wins fall away.
US District Court of Nevada Judge Andrew Gordon said Friday he is leaning toward reversing his initial decision in April when he granted Kalshi a preliminary injunction against Nevada’s enforcement of gambling laws. Gordon reserved judgment after a hearing Friday and expects to issue a written ruling within two weeks.
Kalshi sued Nevada gaming regulators in March after receiving a cease-and-desist letter directing it to stop offering unlicensed gambling. The prediction markets operator argues it is federally regulated by the Commodity Futures Trading Commission and should not be bound by the state order. Kalshi contends the event contracts it offers are derivatives and are recognized financial tools.
Following Gordon’s initial Kalshi decision, he did not grant a similar injunction to Crypto.com in October. During Friday’s hearing, he questioned whether some of Kalshi’s products, largely sports event trades, qualify as derivatives.
“It seems like your definition is so broad that pretty much anything can become a swap, anything can have a financial consequence,” Gordon said, per Bloomberg. “Nobody thought sports bets were commodities or excluded commodities or swaps until some brilliant people at Kalshi.”
Kalshi will likely appeal any decision against it, and multiple industry sources expect the legal battle between state regulators and prediction markets to head to the US Supreme Court.
Prediction markets lawsuits abound
Friday’s hearing came after Kalshi notched a significant win in California last week. A judge denied a motion from three tribes requesting that Kalshi be prevented from operating on tribal lands. The judge said because Kalshi is regulated through the CFTC, the Unlawful Internet Gambling Enforcement Act applies, and the markets do not qualify as bets and therefore do not violate the Indian Gaming Regulatory Act.
Following Gordon’s initial decision in April, a New Jersey judge also granted Kalshi a preliminary injunction to prevent state regulatory enforcement. Since then, 34 state attorneys general sent a brief to support New Jersey’s case.
In Maryland, a judge denied Kalshi’s request for an injunction against the state regulator.
There are also pending lawsuits in other jurisdictions, including Massachusetts, New York and Ohio. Last week, 22 Native American tribes, including the Seminole Tribe of Florida, sent a brief in support of Ohio.
Suffolk County Superior Court in Massachusetts will hold a hearing 9 December to hear that state’s motion for a preliminary injunction against Kalshi.
Multiple other states have also sent cease-and-desist letters to Kalshi, including Arizona, Illinois and Montana.
As commercial sportsbook operators look to launch prediction markets products, including DraftKings and FanDuel, states have also begun to warn them their licences might be at risk if they offer sports event trades. Last week, FanDuel and DraftKings surrendered licences and withdrew applications for sports betting in Nevada.
Original article: https://igamingbusiness.com/gaming/kalshi-prediction-markets-nevada-judge-reversal-potential/
