[co-author: Stephanie Kozol]*
In addition to receiving cease-and-desist orders from several states (Arizona, Illinois, Montana, and Ohio), and ongoing litigation against New Jersey state gaming regulators in the U.S. Court of Appeals for the Third Circuit, KalshiEx LLC (Kalshi) is also now embroiled in litigation with regulators in Maryland and Nevada. Kalshi operates as a designated contract market, which allows adults in all 50 states to make financial trades on a broad range of topics — from sports to the weather.
Nevada
Earlier this year, the Nevada Gaming Control Board (NGCB) issued a cease-and-desist order to Kalshi, notifying the company that it is unlawful to offer event-based contracts on sporting events and election unless it holds an approved license by the Nevada Gaming Commission. In response, Kalshi filed a federal lawsuit stating that it was not required to comply with state gaming laws because those laws were effectively preempted by the Commodity Exchange Act (CEA) and that it falls under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC). A federal judge in the case granted Kalshi a significant win by temporarily enjoining NGCB from putting a halt to Kalshi’s sports-related futures contracts while the case was ongoing. In making this ruling, the court found, among other things, that Kalshi was likely to prevail on the merits when the case goes to trial.
Maryland
Like Nevada, Maryland’s Lottery and Gaming Control Agency issued a cease-and-desist order to Kalshi, alleging that the company was illegally offering sports gambling without a license. As the company did in Nevada, Kalshi sued Maryland’s gaming regulators in federal court and similarly argued that it was under the exclusive jurisdiction of the CFTC and that state law was preempted by the CEA.
However, in contrast to the Nevada proceedings, the district court in Maryland denied Kalshi’s request to stop Maryland’s gaming regulators from blocking Kalshi from offering its sports event contracts. The court’s ruling explained that it does not see a clear distinction between Kalshi’s sports event contracts and sports betting. Kalshi immediately filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit.
Why It Matters
The regulatory scrutiny and litigation facing Kalshi highlight a growing tension not just between courts in different judicial circuits, but between federal and state oversight of financial products. If courts side with state regulators, platforms like Kalshi may face significant operational hurdles and fragmented compliance requirements across different states. Conversely, a ruling favoring federal preemption could pave the way for broader adoption of event-based contracts nationwide. The outcomes of these cases could set important precedents for how similar platforms are regulated in the future, potentially reshaping the boundaries of federal preemption under the CEA and the jurisdiction of the CFTC, and opening new markets to businesses like Kalshi, including in states that have traditionally prohibited or strictly regulated sports wagering.
*Senior Government Relations Manager
