Nevada is taking action against the rapidly growing Wild West of prediction markets. The state's gambling regulators and attorney general sued Kalshi on Tuesday. They accuse the company of bypassing Nevada law by operating a sports gambling market without proper licenses. In addition, they say Kalshi provides services to individuals under 21, which violates state law.
The lawsuit follows a federal appeals court’s rejection of Kalshi's request to prevent the state from pursuing legal action. And it comes a day after the Trump administration claimed that only the federal government has the right to enforce the industry.
Prediction markets, which allow users to bet on events such as sports, political outcomes and wars, have exploded in popularity. Business Insider reports that Kalshi did 27 times as much business during this year's Super Bowl as last year's. Some of that growth has been at the expense of regulated gambling; Nevada's gambling operations did less business during this year's game.
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"Kalshi has continued to dramatically expand its business, rather than attempting to maintain any kind of status quo," Nevada regulators wrote in a letter this month.
Kalshi and rival Polymarket insist that their businesses are "event contracts" and should be regulated as financial investments rather than gambling. The Trump administration, rife with conflicts of interest in this area, agrees. The Chair of the Commodity Futures Trading Commission (CFTC) filed an amicus brief on Tuesday, claiming that it alone has the authority to enforce the prediction market.
"The CFTC will no longer sit idly by while overzealous state governments undermine the agency's exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products," CFTC Chair Michael Selig wrote in a Wall Street Journal op-ed.
Donald Trump Jr. (Photo by Olivier Touron / AFP via Getty Images) (OLIVIER TOURON via Getty Images)
Not coincidentally, prediction markets are a growing part of the Trump family business. Donald Trump Jr. is a paid adviser to Kalshi. He's also an investor in and unpaid adviser to Polymarket. In January, his family's social media business said it would launch its own prediction market platform.
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