Kalshi Will Win Against Nevada: Cryptocurrency Expert
Sam Reynolds | Edited by Parikshit Mishra Apr 9, 2025 8:17 AM
The American legal tradition of federalism, which balances state power with federal control, is being tested at a new level: online prediction markets.
At the center of the story is Donald Trump Jr., who advised Kalshi. Nevada and New Jersey have filed injunctions against Kalshi over sports betting contracts, arguing that they violate state gambling laws.
However, Kalshi has responded by arguing that its offerings are not gambling and that it is regulated by the Commodity Futures Trading Commission and the Commodity Exchange Act because it is a prediction market and not a gambling establishment. According to cryptocurrency attorney Aaron Brogan, this argument should be easy to win in court.
“I’m confident that Kalshi will prevail in these cases,” Brogan told CoinDesk. “If you look closely at the language of the Commodity Exchange Act (CEA), it states that the CFTC has exclusive jurisdiction over any contracts that fall under its regulation, which clearly includes derivatives and event contracts.”
Prediction markets such as Kalshi and Polymarket operate as neutral intermediaries matching orders, just like any other exchange regulated by the CFTC. There is no bookmaker in a prediction market; the market operator does not bet against its users.
Sports has become a major growth area for prediction market operators, with Polymarket Analytics data showing the category has surpassed the 2024 election in terms of volume.
“[Kalshi] is not taking a market side in this case, which fundamentally changes the incentives and makes the product completely different,” Brogan explained.
Kalshi has self-certified these contracts for CFTC events, allowing federally regulated derivatives exchanges to list new products by confirming their compliance without the need for explicit prior approval from the agency.
The Commodity Futures Trading Commission appears open to the argument that sporting event outcomes are commodities, as Brian Quintenz, President Donald Trump’s nominee to head the commission, argued in 2021 that they can serve a legitimate economic purpose as hedging instruments other than pure bookmaking and therefore should not be automatically prohibited under the Wagering Act.
Brogan understands Nevada’s concerns, given the state’s historical reliance on gambling revenue.
However, he notes that Nevada’s actions against Kalshi could inadvertently raise serious questions about the legitimacy of Nevada’s gambling market.
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