Nevada has escalated its battle against prediction markets by filing a lawsuit against Kalshi, the country’s largest prediction market platform, alleging the company is operating an unlicensed gambling business in violation of state law.
The Lawsuit and Timing
The Nevada Gaming Control Board and state attorney general filed the civil enforcement action in Carson City District Court on Tuesday, February 17th, immediately after the U.S. Court of Appeals for the Ninth Circuit rejected Kalshi’s request for a stay that would have blocked the state from taking action. The timing is no coincidence—Nevada acted within hours of the court’s decision clearing the legal path forward.
The Core Dispute
The lawsuit centers on a fundamental disagreement about what prediction markets actually are. Kalshi argues its markets are “event contracts,” financial instruments regulated by the Commodities Futures Trading Commission (CFTC) and therefore fall under federal jurisdiction. Nevada regulators, however, contend that offering bets on sports outcomes and political elections constitutes illegal gambling that requires state licensing.
“Kalshi has continued to dramatically expand its business, rather than attempting to maintain any kind of status quo,” Nevada authorities stated in court filings.
Rapid Growth as Regulatory Flashpoint
The state emphasized Kalshi’s explosive expansion as justification for intervention. The company conducted 27 times as much business on Super Bowl Sunday 2026 compared to the previous year, while regulated Nevada gambling operations saw their business shrink. Kalshi reported over $1 billion in trading volume on the Super Bowl alone.
Federal Support and Broader Regulatory Battle
The lawsuit arrives amid conflicting federal signals. The CFTC sided with prediction market operators on the same day Nevada filed its complaint, with agency chairman Michael Selig declaring “the CFTC is taking an important step to ensure that these markets have a place here in America.”
More than 20 states have filed legal challenges against Kalshi and other prediction market companies, many temporarily blocking operations. A putative nationwide class of Kalshi users also sued the company in federal court in November 2025, alleging violations of state gambling laws and consumer protection breaches.
What’s Next
Kalshi moved to have the case removed to federal court, arguing that only federal law applies. Legal observers expect the case could eventually reach the U.S. Supreme Court. The outcome will determine whether prediction markets can operate as federally-regulated financial platforms or must comply with state-by-state gambling licensing requirements.
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