Nevada regulators argue Kalshi failed to comply with court order, Kalshi disagrees
The Nevada Gaming Control Board (NGCB) said in a Friday filing in Carson City that prediction market platform Kalshi had failed to comply with a court order to stop offering certain event contracts in the state. Kalshi responded by accusing state investigators of breaking federal law.
First reported by Reuters, the NGCB claimed that Kalshi had missed the 12 August deadline to implement geofencing protocols to prevent state residents from accessing event contracts in sports, politics, and entertainment, despite Kalshi having reached an agreement with the NGCB on 24 July.
In the filing, the NGCB argued that Kalshi should face daily fines of US$120,000 until access to its event contracts is restricted.
The regulator said that investigators were able to access the restricted markets on mobile devices within the state, which they argued should not have been possible under the original order.
Kalshi responded to the accusations by alleging that state investigators violated federal law. In a letter to the NGCB, Kalshi’s attorneys argued that the investigators were only able to place the trades because they had misrepresented their residence.
Responding to the original Reuters article on social media platform X, Kalshi’s General Counsel Rick Heaslip called the NGCB court filing a “vindictive waste of taxpayer dollars”.
He wrote, “Kalshi went above and beyond to geofence Nevada as requested. We hired a state-approved vendor and updated Nevada every step of the way, with no response. Instead of engaging, they falsified information (breaking federal law) to hunt for a loophole and manufacture another legal grievance. We addressed it within hours, but they ran to court anyway.”
He added, “This is not the behavior of a regulator trying to protect consumers – it is a vindictive waste of taxpayer dollars at the bidding of casinos.”
Nevada Attorney General Aaron Ford said that Kalshi had submitted its geofencing solution on 9 August, which Ford argued was not enough time for all residents to implement the update by the court deadline.
Kalshi, as well as Crypto.com, still face regulatory pressure in Nevada, with the 9th US Circuit Court of Appeals yet to give its verdict following a civil enforcement action issued by the NGCB in February.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
Nevada’s fight shifts from authority to compliance
Nevada’s dispute with Kalshi has moved into a narrower but potentially more consequential phase: whether the prediction market operator complied with a court-backed agreement to block state residents from accessing prohibited event contracts. The current fight is no longer only about whether sports, political and entertainment event contracts are federally regulated derivatives or state-regulated wagers. It is also about whether a company that agreed to implement geofencing by a set deadline did enough to satisfy Nevada regulators and the court.
That distinction matters because Nevada is seeking daily penalties of $120,000, a figure that came directly from the parties’ July stipulation. The Nevada Gaming Control Board says investigators were still able to access restricted markets from inside the state after the Aug. 12 deadline. Kalshi says those investigators created the appearance of noncompliance by misrepresenting their residence, and the company has accused them of violating federal law. The clash turns a broader jurisdictional fight into a fact-heavy enforcement dispute over technology, user location, account representations and the limits of regulator testing.
The standoff also underscores how aggressively Nevada is trying to protect its gambling framework from prediction markets that market themselves as federally regulated exchanges rather than sportsbook operators. For the state, the stakes include the integrity of its licensing regime and the economic position of casino and sportsbook licensees. For Kalshi, the stakes include its ability to offer event contracts nationally without being forced into state-by-state gaming approvals.
The July deal was meant to pause a contempt fight
The immediate backdrop is the agreement under which Kalshi agreed to withdraw unlicensed event contracts from Nevada and implement geofencing through GeoComply by Aug. 12. Announced July 24, the joint stipulation followed a June 4 ex parte order that held Kalshi in contempt for violating an earlier directive to block Nevada access to covered markets. A hearing scheduled for July 29 was vacated after Kalshi pledged to install the location controls.
The stipulation was carefully drafted. Kalshi did not concede that any trades justified a contempt finding and expressly reserved its defenses. Still, the deal gave Nevada a powerful enforcement mechanism: if Kalshi missed the Aug. 12 deadline, it could face $120,000 in daily fines until geofencing was in place. If Kalshi or GeoComply could not implement the system, they would have to explain why in an affidavit, leaving the court to decide whether any failure was excusable.
That agreement created the standard now at issue. Nevada argues that access by its investigators shows Kalshi missed the deadline. Kalshi argues that it hired a state-approved vendor, kept Nevada informed and closed the alleged loophole quickly. The fight therefore turns on whether compliance means preventing all possible access attempts, including those involving disputed user representations, or whether Kalshi satisfied its obligations by deploying reasonable geolocation controls.
Contempt allegations built on months of escalation
The July stipulation did not come out of nowhere. It followed an earlier push in which the Nevada Gaming Control Board sought a contempt ruling against Kalshi in Carson City. In a June 12 filing, the regulator said Kalshi had not complied with a May 18 order requiring it to geofence its platform so Nevada residents could not access sports and other event contracts. The board asked for monetary penalties and a finding that Kalshi had defied the court.
That contempt request reflected Nevada’s view that the dispute was not merely theoretical. State officials have argued that sports-linked event contracts amount to wagering under Nevada law and cannot be offered without a gaming license. Kalshi has maintained that its contracts fall under federal commodities law, placing them under Commodity Futures Trading Commission oversight rather than state gaming agencies.
The enforcement sequence is important because it explains why Nevada moved quickly after the Aug. 12 deadline. Regulators had already accused Kalshi of disregarding an order, then negotiated a geofencing agreement to resolve the immediate contempt issue. When investigators later claimed they could still trade from Nevada, the board framed the matter as a repeat failure rather than a technical glitch. Kalshi, by contrast, portrays the regulator’s conduct as an adversarial attempt to manufacture a violation after the company had made substantial compliance efforts.
A broader campaign against prediction markets
Nevada’s approach to Kalshi is part of a wider campaign against prediction markets offering sports-related contracts. Earlier this year, the board filed a civil enforcement action against Kalshi in Carson City District Court, seeking a declaration that the platform’s activity violated state gaming laws and an injunction barring access for Nevada residents. The complaint said Kalshi’s promotion of sports contracts as legal nationwide undermined licensed operators and threatened the state’s regulated gaming economy.
Regulators have not limited their actions to Kalshi. Nevada also brought a case in which Polymarket faced its first major lawsuit from the state’s gambling regulator, with the board seeking to block sports event contracts it characterized as unlicensed wagering. The state also took action against Coinbase in the same period and pursued temporary restrictions around high-profile sports betting windows, including the Super Bowl.
The pattern shows Nevada testing several tools at once: cease-and-desist notices, civil complaints, injunctions, contempt motions and negotiated geofencing orders. That layered strategy lets the state address individual platforms while building a broader record that prediction markets are operating products functionally similar to betting. It also pressures companies to adopt state-specific restrictions even while they continue to argue that federal law preempts state gambling enforcement.
Federal courts are not moving in one direction
The legal landscape remains unsettled because courts have reached different conclusions across jurisdictions. Kalshi has found more favorable ground outside Nevada. In Tennessee, a federal judge granted Kalshi a preliminary injunction blocking state officials from enforcing local gambling laws against its sports-related event contracts. The court agreed that the contracts qualify as swaps under the Commodity Exchange Act, a classification that would place them outside Tennessee’s sports wagering rules.
That ruling contrasted with Nevada developments, where courts have allowed state enforcement to proceed at key points. The divergence has strengthened both sides’ incentives to press the issue. Kalshi can point to Tennessee as support for its federal-law theory, while Nevada can point to its own court record as evidence that state gaming laws still apply when event contracts resemble wagering on sports outcomes.
The split also increases the likelihood that appellate courts, and possibly the US Supreme Court, will eventually have to clarify the boundary between federally regulated event contracts and state-regulated gambling. Until then, operators face a patchwork of orders, stays and enforcement actions. States face the risk that aggressive enforcement could be preempted. Operators face the risk that noncompliance with state court orders, even while appeals are pending, could generate fines and operational restrictions.
What the dispute means for the market
The Nevada-Kalshi fight is being watched because it could shape how prediction markets operate in regulated gambling states. If Nevada succeeds in enforcing geofencing and collecting penalties, other states may push for similar restrictions while litigation continues. That would create a de facto state-by-state operating model for sports event contracts, even if platforms continue to claim national authorization through federal commodities law.
If Kalshi persuades the court that it complied or that investigators created the alleged violation through improper tactics, the result could limit how regulators test geofencing systems and strengthen platforms’ arguments that good-faith technical controls are enough. It would not resolve the larger preemption question, but it could make contempt and penalty actions harder for states to sustain.
The case also highlights a practical problem for prediction markets: legal theories do not implement geofencing. Even if an operator believes it is federally authorized, court orders may require it to restrict access in specific states. Compliance then depends on vendors, user data, device location, account information and regulator expectations. In Nevada, those operational details have become the center of the fight, turning a national debate over the future of event contracts into a dispute over whether a resident could still place a trade from inside state lines.
