Published on: November 26, 2025, 05:54h.
Updated on: November 26, 2025, 05:54h.
- Ruling from Nevada judge classifies Kalshi’s sports-event contracts as unauthorized gambling products.
- This decision undermines federal preemption claims made by prediction markets against state regulations.
- Stocks of sportsbooks, such as DraftKings, surge as competitors brace for increased regulations.
A federal judge in Las Vegas has determined that Kalshi’s “sports-event” contracts should be considered unregulated gambling rather than financial instruments overseen by federal authorities.
US District Judge Andrew Gordon’s verdict challenges the fundamental belief that platforms like Kalshi are protected by federal regulations from state gambling legislation. This ruling could have broader implications beyond Nevada, as Kalshi has applied similar arguments in various legal disputes with state authorities nationwide.
Following the announcement, shares of licensed sports betting companies increased, with DraftKings’ stock seeing a rise of 7.7%.
Understanding Event Contracts
Kalshi operates under the regulation of the CFTC, offering event contracts categorized as a type of derivative. These contracts enable participants to wager on the outcomes of specific events with a “yes” or “no” choice before they expire.
Judge Gordon dismissed Kalshi’s assertion that these contracts relating to sports outcomes should be considered “swaps” according to the Commodity Exchange Act (CEA), which would place them under the CFTC’s jurisdiction, effectively overriding state gambling laws.
The judge stated that such an interpretation was “strained” and would fundamentally alter sports betting into federally regulated derivative trading, disrupting longstanding state-level legal frameworks for gaming.
“Kalshi’s interpretation would necessitate all sports betting nationwide to fall under the CFTC’s purview,” the judge remarked. “Such a viewpoint contradicts decades of federalism in gaming regulation, opposes Congressional intent … and is unsustainable.”
In more straightforward terms: “It was never assumed that sports bets were commodities or swaps until some innovators at Kalshi proposed it.”
Cracks in Kalshi’s Defense
This legal case originated when Nevada issued a cease-and-desist letter to Kalshi in March, claiming the company was breaching state gambling regulations and warning of possible civil or criminal repercussions. Kalshi subsequently filed a lawsuit against Nevada, initially securing a temporary injunction from Judge Gordon that prevented state action.
Judge Gordon has now lifted the earlier injunction, which had afforded protection to Kalshi against enforcement by Nevada regulators. Consequently, state authorities are now free to take action against the prediction platform.
In October 2024, Kalshi appeared to be on solid ground after a federal court allowed the listing of political event contracts ahead of the presidential elections, suggesting that some prediction markets might be viewed as legal derivatives. However, the recent ruling has significantly shaken Kalshi’s standing.