Kalshi is facing intensified legal scrutiny from both Nevada and California, two significant states in the United States. On Friday, the Nevada Gaming Control Board (NGCB) requested that the First Judicial District Court in Nevada hold Kalshi in contempt for not adhering to a court order that prohibits users in Nevada from trading on its platform for sports, entertainment, and election contracts. The preliminary order to restrict Kalshi was issued on April 3 and was reaffirmed through an amended order on May 18. However, Kalshi has allegedly failed to comply, prompting the state to seek penalties of 'at least $120,000 each day' for ongoing non-compliance.
While Kalshi initially attempted to block users with Nevada-based IP addresses, the NGCB argued this tactic lacks the effectiveness of geofencing, a standard practice in the gambling industry that restricts access on a jurisdictional level. The company’s current method is described in court documents as a 'homegrown solution' that relies solely on IP addresses and carries a cost of approximately $190,000. The filings highlight that IP addresses are often unreliable for accurately determining user locations, leading the state to assert that Kalshi is 'flagrantly' disregarding the court order and creating 'an intolerable state of affairs.' NGCB Chairman Mike Dreitzer emphasized, 'We will continue to vigorously enforce Nevada law to safeguard gaming in our state.'
In California, Attorney General Rob Bonta announced that the state has joined 36 other attorneys general in filing an amicus brief against Kalshi in an ongoing case with Ohio, currently before the U.S. Court of Appeals for the Sixth Circuit. This action marks the seventh time California has teamed with other states in challenging prediction markets like Kalshi. Just two weeks ago, the state participated in a similar brief regarding Kalshi's lawsuit against Tennessee, and it is noteworthy that the recent brief is the first publicly disclosed filing, suggesting a possible increase in enforcement efforts.
Bonta underscored the coalition’s intent, stating, 'This filing is representative of our bipartisan commitment to protecting state regulatory authority over illegal, unregulated gambling operations.' He stressed that prediction markets should not exploit federal loopholes to bypass state laws aimed at consumer protection and responsible gambling.
While California has not engaged in direct litigation against prediction markets, three tribal gaming entities—Blue Lake Rancheria, Chicken Ranch Rancheria, and Picayune Rancheria—initiated a lawsuit against Kalshi last year, claiming violations of the federal Indian Gaming Regulatory Act. Although they were unsuccessful in obtaining a preliminary injunction, the case is currently under appeal in the Ninth Circuit Court of Appeals.
In Nevada, Attorney General Aaron Ford, who is campaigning to become the state’s first black governor, is personally invested in these legal battles. Following a successful bid in the Democratic primary earlier this month, he will face Republican incumbent Joe Lombardo in the upcoming general election in November. Ford hopes to harness support from midterm voters, particularly as economic challenges and rising costs impact public sentiment, especially related to the ongoing US-Iran war.
Californian Attorney General Bonta is also seeking reelection this year and is actively involved in various gaming matters, including regulating state card rooms and addressing illegal gambling practices. His recent actions have seemingly aligned him with influential state gaming tribes, which reported a gross gaming revenue of $12.1 billion in fiscal year 2024, according to the National Indian Gaming Commission.
In a brief response via social media, a Kalshi spokesperson asserted that the company has complied with the court order in Nevada, questioning the NGCB’s commitment to providing necessary information to resolve any technical issues, stating, 'If the NGCB had a genuine concern regarding a technological flaw in our system, they would have given us the information we need to fix it, yet they haven’t.'
