Kalshi, a federally regulated prediction market platform, has secured a key legal victory in its battle with Nevada regulators, winning a preliminary injunction that allows it to continue operating in the state for now. The ruling, issued by U.S. District Court Judge Andrew P. Gordon, halts the state’s enforcement of a cease-and-desist order while the broader case proceeds through federal court.

Kalshi had sought both a temporary restraining order and preliminary injunction in response to the Nevada Gaming Control Board’s (NGCB) March 25 order that sought to block the company’s sports-based event contracts. The state alleged that such offerings constitute unlawful gambling activity unless licensed by the Nevada Gaming Commission. Judge Gordon granted Kalshi’s request in part, allowing it to maintain its operations while denying the NGCB’s counter-motion to shut the platform down immediately.

The court’s brief ruling did not include detailed reasoning, which is expected in a forthcoming written decision. For now, however, Kalshi is free to continue offering sports-related prediction contracts, including those covering events like the Super Bowl and NCAA’s March Madness, which it launched in collaboration with Robinhood.

State Opposition Meets Federal Oversight

Kalshi’s legal defense hinges on its status as a platform regulated by the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA). The platform argues that its sports prediction markets fall under the purview of federal derivatives regulation and therefore should not be subject to state-level gambling restrictions.

Aaron Brogan, a crypto-focused attorney, told CoinDesk that Kalshi’s position is on solid legal footing. “I think clearly Kalshi is going to win these cases,” Brogan stated. “If you look at the language of the Commodity Exchange Act, it says that the CFTC has exclusive jurisdiction over any contracts that fall within its regulatory purview, which derivative contracts and event contracts clearly do.”

Brogan emphasized that Kalshi operates like a neutral marketplace rather than a sportsbook. “They’re not taking a side of the bet as the market in that case, which fundamentally changes the incentives involved and makes the product different in a holistic way,” he said.

The Nevada case is just one front in a broader national challenge. Kalshi is facing similar regulatory pushback in five other states—New Jersey, Illinois, Maryland, Ohio, and Montana. New Jersey has also issued a cease-and-desist order, prompting Kalshi to file suit in federal court against regulators there as well.

A Federalism Test in the Digital Age

Kalshi’s dispute with state authorities has broader implications for how gambling and financial markets are regulated in the U.S. In essence, the case raises fundamental questions about federalism—specifically, whether federally authorized financial instruments can override state-level gambling laws.

Brogan sees the issue as a pivotal one. “This is incredibly complicated,” he noted, “and we’re right on the cusp of litigation that could definitively define who will predominate. It’s complex, but it’s going to be really important.”

Nevada, with its deep-rooted economic ties to the gambling industry, is understandably wary of unlicensed competition. But in labeling Kalshi’s prediction markets as gambling, the state may have inadvertently invited scrutiny of its own gambling frameworks. Brogan pointed out that if event contracts are considered derivatives—similar to what Kalshi offers—then even state-licensed betting platforms might technically fall under federal regulation.

“In that case, federal preemption could theoretically crowd out state authority to oversee those gambling markets at all,” he explained.

Next Steps and Ongoing Uncertainty

Although Kalshi’s preliminary win in Nevada ensures it can continue offering its services for now, the legal proceedings are far from over. A detailed court opinion is still pending, and similar lawsuits in other states remain active. Still, Kalshi’s leadership expressed optimism.

“Today, the Federal Court in Nevada granted Kalshi’s preliminary injunction and blocked the State from trying to prevent Kalshi from offering prediction markets,” the company said in a statement. “We are grateful for the court’s careful attention to this matter and recognition of Kalshi’s status as a CFTC-regulated exchange. On to the next step.”

CEO Tarek Mansour echoed this sentiment, emphasizing the significance of the court’s recognition of Kalshi’s federal regulatory framework. As the legal landscape around prediction markets continues to evolve, Kalshi’s case may set a precedent for how such platforms are treated across the United States. Whether this model ultimately reshapes the sports betting industry—and challenges the traditional jurisdiction of state regulators—remains to be seen.