Nevada fights Kalshi in court, citing conflicting arguments and Tenth Amendment

The Nevada Gaming Control Board (NGCB) is pushing back against Kalshi’s legal challenge, leaning on the Tenth Amendment and the Supreme Court’s Murphy v. NCAA decision to make its case. After issuing a cease-and-desist order to the prediction market platform, Nevada is aiming to make it clear that federal law doesn’t get to steamroll state authority.

Kalshi, which has been trying to expand into political event contracts, has run into resistance from several states. In response, the company took its fight to federal court, asking for protection from those state-level crackdowns. But Nevada argues that this is a clear case of federal overreach and that the state has every right to regulate within its own borders.

Nevada calls out Kalshi over conflicting arguments

In its current lawsuits in Nevada and New Jersey, Kalshi is arguing that “sports-outcome contracts” are indeed lawful under the Commodity Exchange Act (CEA). But that’s a stark reversal from what it told the D.C. Circuit just a few months ago when it made it very clear that Congress did not intend for sports betting to be conducted on derivatives markets.

Nevada asserts that Kalshi is judicially estopped from arguing that sports-related event contracts are OK under federal law when it said just the opposite in its CFTC lawsuit. But if you’re going to do judicial estoppel right, please quote the district court statements. pic.twitter.com/zosU4nxGgK

— Daniel Wallach (@WALLACHLEGAL) April 5, 2025

During those arguments, Kalshi argued that election contracts were not “gaming”, and the debate around the definition of gaming was central to oral arguments in the Circuit Court.

In its November 2024 D.C. Circuit briefing, Kalshi unequivocally stated: “An event contract thus involves ‘gaming’ if it is contingent on a game or a game-related event.

“The classic example is a contract on the outcome of a sporting event; as the legislative history directly confirms, Congress did not want sports betting to be conducted on derivatives markets. Elections, by contrast, are not games or related to games. They are not staged for entertainment, diversion or sport.”

But now, as Kalshi faces regulatory heat from states like Nevada and New Jersey, it has pivoted sharply, claiming these same types of sports-related contracts are perfectly legal under federal law.

Nevada says federal law can’t force states to enforce national regulatory schemes

Nevada invokes Murphy v. NCAA and the 10th Amendment anti-commandeering principle in its response to Kalshi’s TRO motion, arguing that “Congress cannot commandeer the states by issuing orders to compel facilitation or adoption of preferred federal regulatory programs.” pic.twitter.com/fdvA8i7ODb

— Daniel Wallach (@WALLACHLEGAL) April 5, 2025

The NGCB stated in its court filing, referencing the Commodity Exchange Act: “Kalshi asserts that Congress enacted the CEA to bring futures markets under a uniform regulatory scheme.

“It also asserts that a contract market could not operate efficiently if varying or contradictory legal standards governed its duties to investors.

“The State of Nevada is not an investor. It is a sovereign entity. And while Congress has the power to regulate individuals, it does not have the power to regulate states.”

In a 24-page filing, Nevada AG Aaron Ford argues on behalf of the state that #Kalshi failed to demonstrate that Congress through the Commodity Exchange Act (CEA), intended to preempt Nevada state gaming laws under the Supremacy Clause of the Constitution. pic.twitter.com/jZ6CzSpg0X

— Matt Rybaltowski (@MattRybaltowski) April 4, 2025

The NGCB’s argument rests on constitutional principles of federalism, particularly the “anti-commandeering” doctrine affirmed in Murphy v. NCAA, a 2018 Supreme Court ruling that struck down a federal law barring states from legalizing sports betting. The Court held in that case that Congress cannot “commandeer” state governments by forcing them to enforce federal regulatory programs.

“This is consistent with the Tenth Amendment which reserves to the States ‘[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States…’” the NGCB wrote, quoting the US Constitution. “Put another way, Congress cannot commandeer the states by issuing orders to compel facilitation or adoption of preferred federal regulatory programs.”

The NGCB then stated that its existence as a regulatory body is a product of state sovereignty: “The NGCB was created by the Nevada [state legislature],” the filing added, making it clear that federal law can’t force the state to take part in regulatory programs it didn’t sign up for.

Kalshi won’t be stopping offering contracts

Kalshi co-founder Tarek Mansour appeared unfazed by recent cease-and-desist orders issued by five states, including Nevada. In an interview with TechCrunch on Friday (Apr. 4), Mansour downplayed the legal pressure, saying he isn’t “necessarily very concerned” about the actions taken by state regulators.

He said: “We are literally like a financial exchange, but the underlying trading is events.

“The CFTC is our regulator. If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”

Mansour then seemingly blamed “casino lobbyists” for the cease-and-desist letters Kalshi received from Nevada, New Jersey, Ohio, Illinois, and Montana. He also claimed that the Nevada sports betting regulatory agency released the cease-and-desist letter publicly before Kalshi received it.

He stated: “(Kalshi) had to call four times to see if they were going to send it.

“Legally, you cannot receive a cease-and-desist on Twitter.”

ReadWrite has reached out to Kalshi for comment.

Featured image: Kalshi / Canva

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