Nevada's gambling oversight authorities and its attorney general have filed a lawsuit against Kalshi on Tuesday, alleging that the firm is evading state regulations by running a sports betting platform without the required approvals. The complaint also charges Kalshi with offering its platform to users younger than 21, contravening Nevada's legal restrictions.
This legal move comes after a federal appeals court denied Kalshi's bid to block the state from initiating proceedings. It arrives just one day following assertions from the Trump administration that federal authorities hold sole responsibility for regulating the sector.
Platforms enabling bets on outcomes like athletic contests, elections, and conflicts have seen a surge in user engagement. According to Business Insider, Kalshi's transaction volume during the recent Super Bowl was 27 times higher than the previous year. This increase appears to have diverted activity from licensed betting venues, as Nevada's established gambling enterprises reported lower revenues for the event.
In a recent correspondence, state officials noted that Kalshi has aggressively scaled its operations instead of adhering to any interim compliance measures.
Both Kalshi and its competitor Polymarket maintain that their offerings qualify as event-based contracts subject to financial oversight, not traditional wagering rules. The Trump administration, which faces questions about impartiality here, supports this view. On Tuesday, the head of the Commodity Futures Trading Commission submitted a supporting brief, asserting the agency's singular oversight of such platforms.
In a Wall Street Journal opinion piece, CFTC Chair Michael Selig stated that the commission refuses to remain passive as aggressive state actions challenge its sole regulatory power over these innovative offerings by imposing broad local bans.
This development aligns with the expanding role of prediction platforms in the Trump family's ventures. Donald Trump Jr. serves as a compensated consultant for Kalshi and holds an investment stake while advising Polymarket without pay. Earlier this year, the family's social media enterprise announced plans to introduce its own such platform.
These markets carry risks of insider dealings. Blockchain research firm DeFi Oasis found that less than 0.04% of Polymarket users accounted for more than 70% of the site's earnings, exceeding $3.7 billion in total.
The Guardian reported last month on a Polymarket participant who wagered substantial sums affirming that Israel would conduct strikes on Iran before the upcoming Friday. Shortly after, Israeli forces attacked, resulting in numerous fatalities, and the bettor profited $128,000. Through blockchain tracing, the outlet linked the activity to a digital wallet tied to a social media profile located in Beit Ha'shita, an Israeli community in the north. The individual subsequently shifted funds to two additional wallets, seemingly to evade scrutiny. Earlier in the year, those accounts featured 10 active wagers concerning Israel's defense approaches.
In a separate instance, an unidentified bettor earned more than $400,000 predicting Venezuelan leader Nicolás Maduro's removal by late January, with stakes placed right before and during U.S. military actions against the nation. Additionally, a group of eight linked accounts amassed over $161,000 by backing Venezuelan opposition figure María Corina Machado Parisca for the Nobel Peace Prize. Their usernames included references like 'fmaduro,' 'madurowilllose,' 'striketheboats,' and 'trumpdeservesit'.