Kalshi has filed lawsuits against the Nevada Gaming Control Board (NGCB) and the New Jersey Division of Gaming Enforcement (DGE) after both state authorities issued cease-and-desist letters.
The action was taken in an attempt to block state-level enforcement orders.
Specifically, the states have alleged that the “prediction market for trading event contracts” is operating illegally.
Both cases against Kalshi are very similar, with the company seeking a temporary restraining order to prevent the NGCB from shutting it down.
Kalshi’s reciprocal legal case states that Nevada is unconstitutionally striving to regulate trading activity that comes under federal jurisdiction, outside its remit.
It also makes the argument that allowing individual states to set their own restrictions would create a tangled regulatory framework that Congress has worked to avoid.
The NGCB issued its instruction on March 4, with Kalshi requesting and receiving an extension to respond on March 14.
At this time, Kalshi also launched single-game betting contracts for college basketball games in partnership with fellow trading platform Robinhood.
The NJDGE then issued a C+D on March 27, with a reported response deadline of midnight on the same date.
Robinhood responded by immediately dropping the Kalshi college basketball contracts.
Kalshi just filed suit in federal court against the states of Nevada and New Jersey. As promised, Kalshi will keep fighting for the right of prediction markets to thrive.
Over the last decade, the concept of objective truth has been dangerously eroded by aggressive… pic.twitter.com/sgJtJXz6Pj
— Tarek Mansour (@mansourtarek_) March 30, 2025
Potential reputational and financial damage
There are further fears that injunctions would have a devastating impact on the platform.
Kalshi is now in a difficult predicament as a cease-and-desist instruction could have potentially irreparable consequences, including damaging disruptions for users on the platform.
Alternatively, a refusal to comply with such an order would bring problems of its own, opening up the company to further legal liabilities.
Kalshi has only expanded into sports event trading in recent months, but just three months on, the activity is concerning state and tribal regulators.
That is despite the legal win over the CFTC in October last year, which created the space to offer contracts on the outcome of the US elections.
Tribal bodies have expressed unease that Kalshi sports offerings, including peer-to-peer trading on outcomes, could conflict with the Indian Gaming Regulatory Act, but others have suggested the sport outcome-based contracts constitute gaming under state and federal law.
If proven, this could lead to further regulations and legal challenges for the prediction market.
Imag credit: Kalshi
