Kalshi hit with cease and desist from Nevada regulator
On March 4, the Nevada Gaming Control Board (NGCB) established a significant precedent by issuing a cease-and-desist order to Kalshi, a New York-based prediction market known for its controversial operational practices.
In its official release, the NGCB clarified that offering contracts for sports and elections is deemed “unlawful in Nevada unless explicitly authorized through licensing by the Nevada Gaming Commission.” Kalshi has been mandated to discontinue its operations in the state by 5 PM on March 14, with the Board warning that past operations are still liable for potential criminal and civil penalties. This decisive action highlights the NGCB’s commitment to enforcing its regulatory framework in the rapidly evolving landscape of gaming.
This cease-and-desist letter marks the first regulatory action at the state level against prediction markets, an emerging sector of the gambling industry. Notably, Kalshi previously overcame a federal legal challenge from the Commodity Futures Trading Commission (CFTC), which permitted the company to continue its operations alongside other platforms, such as Crypto.com. However, potential future challenges loom as the gaming regulatory environment remains unpredictable.
When federal authorities initially sought to prohibit Kalshi and similar platforms from facilitating election-related contracts, their efforts failed. Not surprisingly, in the lead-up to the November election, these platforms collectively attracted billions in contract volume. Following this, Kalshi extended its offerings to include sports contracts in January, thereby raising eyebrows within the established gaming industry.
The NGCB’s ruling emphasized the illegality of both election and sports contracts within Nevada. The Board also stated that licensed sports pools are explicitly prohibited from accepting wagers on elections, indicating potential further regulatory avenues for state authorities.
In a statement shared on X, Kalshi’s CEO Tarek Mansour expressed disappointment over the NGCB’s decision but reaffirmed the company’s commitment to fostering regulated prediction markets in the United States. He remarked, “To the prediction markets community: last year proved how vital our mission is. We have fought hard to reach this point, yet our journey is not over, and we shall continue our efforts until prediction markets are fully embraced.”
Regulatory Compliance and the Future of Prediction Markets
Kirk Hendrick, the chair of the NGCB, who will relinquish his position at the end of Nevada’s legislative session, articulated that any attempts to bypass the state’s authority to regulate gaming activities will invoke legal consequences.
“Each sports pool operating in Nevada must undergo a thorough investigation prior to licensing, adhere to stringent regulations once licensed, and fulfill all applicable tax obligations,” he stated. His remarks align closely with the concerns previously expressed to the CFTC by various tribal and commercial gaming groups. These stakeholders are advocating for a comprehensive review of prediction markets, with a roundtable discussion scheduled for April 30, although the specifics of this meeting remain uncertain.
The American Gaming Association (AGA) echoed similar sentiments in its submission to the CFTC, arguing that the introduction of a “national” sports betting product undermines state regulatory authority and adversely affects state tax revenues.
“By circumventing the crucial regulatory safeguards established by states, these platforms pose significant risks to consumers and the integrity of the marketplace,” the AGA articulated. “Legal sportsbooks operate under rigorous compliance mandates, including age verification, Know Your Customer (KYC) and anti-money laundering (AML) protocols, as well as self-exclusion and integrity monitoring. The current oversight by the CFTC fails to sufficiently address these vital areas.”
As the regulatory landscape continues to evolve, the burgeoning prediction market sector will need to navigate a complex web of federal and state regulations. The outcome of this regulatory scrutiny could reshape the future of gambling in the United States, paving the way for either stricter controls or greater acceptance of innovative gaming platforms.
