A long-running legal fight between prediction market operator Kalshi and Nevada gaming officials took a dramatic turn this week after a federal judge reversed an earlier ruling that had shielded the company from state enforcement. The decision vacates a preliminary injunction granted in April and significantly complicates Kalshi’s efforts to continue offering sports-related event contracts in Nevada, according to iGaming Business.

U.S. District Judge Andrew Gordon concluded that Kalshi’s reliance on its federal registration with the Commodity Futures Trading Commission (CFTC) does not preclude states from regulating its activity. In his Tuesday order, Gordon determined that Kalshi’s interpretation of the Commodity Exchange Act (CEA) “upsets decades of federalism” and would effectively move sports wagering nationwide into the federal derivatives framework — a reading he rejected as incompatible with congressional intent.

Kalshi responded swiftly, signaling it expects to appeal. A spokesperson said, “We respectfully disagree with this decision. As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction. It’s very different from what state-regulated sportsbooks and casinos offer their customers. We are evaluating the decision and anticipate making an appeal to the Ninth Circuit.”

Judge Cites New Legal Developments and Shifting Facts

Judge Gordon’s reversal stems partly from developments in a separate case involving Crypto.com, another prediction market platform seeking similar protections. In October, Gordon declined to issue Crypto.com an injunction, expressing doubt that sports event contracts qualify as “swaps” under the CEA. Because that ruling constituted a change in relevant legal conditions, he agreed to revisit Kalshi’s injunction as well.

In dissolving the injunction, Gordon wrote that both new facts — including Kalshi’s expansion into prop bets and parlays since April — and evolving case law justified reconsideration. He noted, “The law and facts have evolved in this court and others. The circumstances may change yet again when the Third and Fourth Circuits rule on the appeals pending in those courts, or when the Ninth Circuit rules on the inevitable appeal of my rulings in Crypto, this case, and Robinhood.”

Gordon also emphasized fairness, stating that allowing Kalshi to operate while blocking Crypto.com would be inconsistent: “It would be unfair for me to not consider dissolving the injunction given that I denied an injunction under similar circumstances for one of Kalshi’s competitors in Crypto.”

Expanding National Divide Over Prediction Markets

The Nevada ruling deepens a growing rift among courts nationwide about whether event-based trading platforms qualify as gambling enterprises or federally regulated financial markets. Similar suits are active in New Jersey, Maryland, California, Wisconsin, New York, Massachusetts, and Ohio. In some venues, Kalshi has scored wins — including a recent California decision concluding that CFTC-regulated event contracts do not fall under the Indian Gaming Regulatory Act.

Nevada regulators, however, maintain that Kalshi is effectively running an unlicensed sportsbook. They issued a cease-and-desist order in March, arguing that sports outcome-based contracts are gambling products requiring a state gaming license. Gordon’s latest ruling aligns with those concerns, writing, “Kalshi has established a market for sports betting. Kalshi advertised that it is the ‘first app for legal sports betting in all 50 states.’ But Kalshi is not licensed to conduct gaming in Nevada or any other state.”

Path Forward: Appeal Likely, Temporary Stay Possible

Although Gordon found Kalshi “not likely to succeed” on the merits, he also acknowledged that the company raised “serious questions” about how to interpret federal derivatives law and its interaction with state gambling oversight. That acknowledgment has prompted speculation that he may allow Kalshi’s contracts to remain available temporarily by staying enforcement during the appeal process.

Kalshi has already requested such a stay, warning that without it, it faces “imminent criminal enforcement,” potential prosecution, and significant harm to customers holding active contracts. Gordon is expected to rule on the stay soon, while Kalshi prepares for what could become a defining Ninth Circuit appeal — and potentially a future U.S. Supreme Court showdown, given conflicts emerging among multiple federal courts.