Nevada opposes Kalshi's request to delay court rehearing on prediction markets
The state argues a delay would not change the outcome of a ruling that found sports-event contracts are not swaps.
Nevada has opposed Kalshi's request to delay a rehearing by the U.S. Court of Appeals for the Ninth Circuit over the regulation of its prediction market platform. The state argues a delay would not change the court's previous ruling that sports-event contracts are not swaps. This comes as the Commodity Futures Trading Commission proposes new rules for event contracts. Kalshi had asked the court to grant a rehearing or hold its petition until the CFTC publishes a revised rule.
In a filing with the court, attorney Nicole Saharsky, representing Nevada, said a delay is unnecessary. "To start, the CFTC’s intent is nothing new," Saharsky wrote. "The court was well aware that the CFTC planned to revise section 40.11 when it issued the decision." She argued the court's ruling was based on the text, context and purposes of the Commodity Exchange Act, not on the specific rule Kalshi wants revised.
Saharsky contended that Kalshi's argument is an attempt to prolong its operations. "Fundamentally, Kalshi’s argument is just another attempt at delay, so that Kalshi can continue its unlawful operations for as long as possible," she wrote. "The weight of authority confirms that the court’s decision is correct and that there is no reason to wait to deny Kalshi’s petition." The Ninth Circuit ruled 3-0 in August that the Commodity Exchange Act likely does not preempt state gaming law, allowing Nevada regulators to oversee Kalshi's platform.
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Last week, the CFTC submitted two proposed rules to the White House Office of Information and Regulatory Affairs related to prediction markets. One proposed rule would further define a swap to include event contracts. The second proposed rule would exclude casino-style gambling products. The agency is seeking to confirm its jurisdiction following adverse court rulings and pushback from states and tribes.
Kalshi has faced several legal setbacks recently. The U.S. Circuit Court for the Sixth Circuit ruled that Ohio and Tennessee can enforce their sports gambling laws against the platform. That court rejected Kalshi's argument that the Commodity Exchange Act protects its sports-event contracts. In a separate ruling, the Ninth Circuit also found the act does not authorize sports betting on tribal land in the case Blue Lake Rancheria versus Kalshi.
In Illinois, a federal judge on Friday granted in part requests by Kalshi, Coinbase and the CFTC for preliminary injunctions. The judge found that state gaming licensing regulations conflict with federal law governing sports event contracts. The precise terms of the injunction still need to be drafted. The judge ordered the parties to submit a proposed injunction by October 29 and left challenges to the state’s wagering fees unresolved. The Illinois Gaming Board believes sports-event contracts are illegal untaxed gambling, and the state legislature recently imposed a transaction tax of 1.75% to 3.5% on them.