The Nevada Gaming Control Board (NGCB) has issued a cease-and-desist order to Kalshi, requiring the company to cease all unlawful activity by 14 March 2025.
Event-based contracts, crypto sportsbooks, and online sweepstakes casinos are three online wagering mediums that continue attracting regulatory attention.
Kalshi has pursued aggressive advertising, claiming it offers legalized sports betting in 50 states. The company, which offers event contracts, has recently entered the single-match sports events market, sparking controversy among regulators and gambling industry stakeholders.
The company is regulated by the Commodity Futures Trading Commission (CFTC) instead of individual sports betting regulators. In the run-up to the election, the company gained a lot of notable press, as it won a legal dispute with the CFTC and was allowed to offer events markets for the election outcome.
Kalshi’s Event Contracts: Legal Loophole or Unlawful Betting?
Nevada’s regulator has not taken kindly to Kalshi’s belligerent approach to regulation. It has notified them that “offering event-based contracts on sporting events and election outcomes is unlawful in Nevada, unless and until approved as licensed gaming by the Nevada Gaming Commission.”
The cease and desist letter details multiple Statutes and Nevada Gaming Commission Regulations that Kalshi is allegedly violating, and has threatened that continued operation may result in criminal charges.
Regarding elections, the letter explicitly mentions that even licensed sports pools in Nevada are prohibited from accepting wagers on elections. Therefore, Kalshi’s actions directly violate the state’s public policy.
The company must cease all unlawful activity by 5 p.m. on 14 March 2025. The letter, signed by NGCB Chairman Kirk Hendrick, explains that past actions are still subject to criminal and civil penalties, and any future activity will be deemed ‘willful violations.’
Hendrick explained: “Every sports pool in Nevada must undergo an extensive investigation prior to licensing, must adhere to strict regulation once licensed and must pay all applicable taxes and fees.”
He continued: “Any unlawful attempts to circumvent Nevada’s right to regulate gaming activity within its borders will be met with the full force of criminal and civil penalties.”
Tribal Opposition Adds Pressure on CFTC Over Event Contracts
CFTC-led roundtables will soon discuss the issue of sports events contracts. There has been much public opposition to such activity, with various letters submitted by tribal gaming stakeholders adding extra noise.
The Indian Gaming Association, which represents 124 federally recognized Indian Tribes stated: “Allowing Sports Contracts to be listed and traded will interfere with the sovereign right of tribes and states to exercise their police power to regulate gaming within their respective territories–a right long recognized by courts throughout the United States.”
The Indian Gaming Association, an inter-tribal group of 124 federally recognized Indian Tribes wrote: “Allowing Sports Contracts to be listed and traded will interfere with the sovereign right of tribes and states to exercise their police power to regulate gaming within their respective territories—a right long recognized by courts throughout the United States.”
The California Nations Indian Gaming Association shared similar, and voiced concerns for broader state regulators, saying: “Allowing Sports Contracts to be traded on a national exchange would create a federal loophole to tribal and state sports betting regulations, effectively preempting a whole swath of laws enacted by sovereign governments seeking to protect the health, welfare, and safety of their citizens.”
It will be interesting to see if Kalshi conforms to the cease and desist order and how the often outspoken company reacts to a significant blow.
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