Nevada Says Federal Law Does Not Cancel State Gambling Rules

Nevada and Kalshi are facing off in court over whether federally regulated prediction markets can bypass state gambling laws. Kalshi, which operates under federal oversight, is fighting back against Nevada’s cease-and-desist order. But the state is holding firm, filing 18 legal defenses to support its position.

Good to know

• Nevada argues that federal law does not override state gambling regulations.
• Kalshi has also taken legal action in New Jersey and Ohio.
• Attorneys general from 36 jurisdictions back state regulators over Kalshi.

The central disagreement revolves around the Commodity Exchange Act (CEA), which Kalshi claims gives it the right to offer sports prediction markets nationwide. Nevada disagrees. The state says Congress never meant for the CEA to cancel out state-level gambling laws, especially in a state where gaming is heavily regulated.

Nevada’s legal team also raised sovereign immunity, saying the state cannot be sued by an out-of-state company in federal court. That alone could end the case unless Kalshi can argue around it.

Other defenses include judicial estoppel, with Nevada claiming Kalshi is contradicting a previous legal position it once used successfully. The state also invoked collateral estoppel to argue that some of these issues were already settled and should not be revisited.

Kalshi CEO Tarek Mansour has continued to defend the company’s approach. He said users are not betting against a house but are simply trading contracts with each other, fully in line with Commodity Futures Trading Commission (CFTC) rules. Mansour also stressed that Kalshi is not a sportsbook and should not be treated as one.

Kalshi’s problems are not limited to Nevada. It has filed similar lawsuits in New Jersey and Ohio. All three states took action against the platform’s sports-related markets, leading to broader concern among regulators that Kalshi could be offering gambling without proper licensing.

That concern is not isolated. Attorneys general from 36 states and territories filed a joint brief supporting New Jersey’s position and echoing Nevada’s arguments. Their view is that Kalshi’s model attempts to sidestep rules traditional sportsbooks must follow, including strict licensing and oversight.

While Kalshi has become attractive to some users due to favorable odds—especially in states with high wagering taxes like Illinois—the legal pushback shows that popularity alone is not enough to avoid regulatory challenges.