Instant Analysis: Nevada Regulators Tell Kalshi To Leave State
Kalshi statement: "We look forward to a swift resolution to this matter and to ensuring that Americans continue to have access to safe, regulated, and transparent prediction markets"
Kalshi is no longer welcome in one of the 50 states. But will it continue to offer prediction markets and sports betting in every state anyway?
News came late Tuesday that the Nevada Gaming Control Board had issued a cease-and-desist letter to Kalshi. Read all about it in my other newsletter, The Event Horizon:
The NCGB posted a press release about the action against Kalshi on both LinkedIn and Twitter.
A Kalshi spokesperson offered this statement to The Closing Line this evening:
"While we’re disappointed with the Commission’s assessment, Kalshi has always held the utmost respect for regulators and the regulatory process. We’ve been a federally regulated exchange for over four years and a federally regulated clearinghouse for about six months. We are proud to have paved the way for prediction markets to thrive in the U.S. We look forward to a swift resolution to this matter and to ensuring that Americans continue to have access to safe, regulated, and transparent prediction markets."
So what do we know so far?
This is believed to be the first state to attempt to shut down/take action against Kalshi. If another state has taken similar action, it’s not been made public.
Nevada regulators believe "event-based contracts" on sporting events and election outcomes are not legal unless approved as licensed gaming in the state.
NGCB set a deadline of 5 p.m. on March 14, 2025, for compliance with the request.
Here are questions, with some attempts at answers:
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Will Kalshi comply with the C&D?
This is the main question that needs to be answered. If nothing else, we’ll likely find out what they will do in the next ten days.
It’s hard to believe Kalshi goes quietly into the sweet night. If it complies, it’s arguably open season on similar actions from other states, especially those with legal sports betting. If states begin picking off Kalshi’s markets one-by-one — and it seems like their entire business model is under threat in Nevada — Kalshi is going to be in for a world of hurt.
I will say that I was surprised at the relatively mild tone of Kalshi’s statement; I expected something a bit more over-the-top. What’s that mean? Probably not much other than there’s not much benefit to a brash answer right now.
If I am handicapping it, I would put Kalshi saying it will just leave Nevada as a decided underdog.
Is Kalshi doesn’t leave, what happens?
Another great question! Kalshi ignoring the C&D and continuing business as usual seems unlikely as well. But if we put that in the realm of possibility we’re left with a couple of options.
Nevada tries to enforce the C&D or does nothing. We got this from NGCB in the presser: “Additionally, the letter explains that past unlawful action remains subject to criminal and civil penalties, and any future unlawful activity will be deemed willful violations.”
Does that mean Nevada does something if the deadline comes and goes and Kalshi is still operational? That seems a bit far-fetched. Whether Nevada is in the right or not, it’s a pretty big and lonely island for NGCB to put itself on, especially given the Trump administration’s friendly views on prediction markets in the macro and Kalshi in the micro.
That being said, why would Nevada issue a C&D if it wasn’t prepared to take an enforcement action? Could they be bluffing, figuring Kalshi will just do what they say?
If nothing else, the Nevada action starts making the state viewpoint on prediction markets clear as the Commodity Futures Trading Commission ponders the future of prediction markets, and if sports event trading will continue at Kalshi and elsewhere. Taking action > just complaining in the meta of this whole thing.
Kalshi and Nevada end up in court. Kalshi doesn’t want to leave and also steadfastly believes that it’s legal everywhere as a federally regulated exchange. If that’s true, don’t they somehow take Nevada to court to determine their legality? Of course, that’s potentially fraught with peril; if Kalshi loses a case on how state law and federal regulation intersect in this instance, it could be the beginning of the end. A court case also kicks the can down the road for years between an initial case and an appeals process.
What I think we need is for Kalshi to put up a prediction market about whether it will leave Nevada by the deadline. I am joking. Maybe.