nevada

Prediction market Kalshi recently faced a setback after a federal judge in Nevada ruled that contracts tied to sports events can be regulated by state gaming laws, challenging the industry's belief that federal oversight through the Commodity Futures Trading Commission (CFTC) was sufficient. This has created regulatory uncertainty for Kalshi and other platforms offering similar products, such as Robinhood and Crypto.com.
Regulatory background and legal challenges
Federal vs. state jurisdiction: Kalshi and its supporters have argued that their status as a Designated Contract Market with the CFTC should give the federal agency exclusive jurisdiction over their event contracts. The recent Nevada ruling, however, rejected this argument, stating that sports-related contracts do not qualify as "swaps" under federal law and are thus subject to state gambling regulation.
Immediate impact: Following the Nevada decision, Crypto.com suspended sports-related contracts for Nevada residents. Kalshi is facing similar pressure as it appeals the ruling.
Wider implications: The Nevada ruling could create a precedent for a state-by-state regulatory battle for prediction markets, disrupting the perceived regulatory clarity for companies operating under federal registration.
Additional legal battles: Kalshi is also facing lawsuits from tribal gaming entities in Wisconsin and California, which allege that the platform is infringing on tribal gaming regulations. Several states, including New Jersey and Maryland, have also issued cease-and-desist letters.
Possible appeal to the Supreme Court: According to a policy analyst at TD Cowen, the jurisdictional question could eventually end up before the Supreme Court, though a final decision could be years away.
Future outlook
Uncertainty for prediction markets: The legal setback in Nevada injects considerable regulatory uncertainty into the prediction market sector. This could force platforms to navigate a complex patchwork of state regulations in addition to federal oversight.
Polymarket's contrasting situation: While Kalshi faces legal hurdles, another prediction market, Polymarket, has received approval from the CFTC to re-enter the U.S. market, giving it a potential advantage.
Growing institutional interest: Despite the regulatory challenges, institutional players like Galaxy Digital are still exploring partnerships with prediction market platforms, suggesting continued interest in the sector.

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