A federal appeals court has ruled that Nevada can regulate Kalshi, which could bring new life to efforts by Arizona Attorney General Kris Mayes to prosecute the prediction market platform for violating the state’s gaming laws.
The 9th U.S. Circuit Court of Appeals on Friday rejected arguments by Kalshi that it is exempt from the oversight by the Nevada Gaming Commission because its activities are regulated by federal law.
The three-judge panel said the regulations of the Commodities Exchange Act, under which Kalshi operates, do not preempt state oversight of wagering on sports.
A federal judge in Arizona had previously barred Mayes from pursuing Kalshi on criminal charges based on his conclusion that the Commodities Futures Trading Commission has exclusive jurisdiction over what it calls the trading of "swaps.''
Judge Michael Liburdi said wagering money on future events, including gambling and the outcome of elections fits the legal definition of swaps, and that preempts state laws which specifically restrict such wagering.
The 9th Circuit sets precedent that has to be followed by trial judges in nine western states, including Arizona. And if the Nevada ruling is upheld on subsequent appeals, Kalshi could seek Supreme Court review.
Mayes said in a statement she believes it provides the opening for her to go back to Liburdi and force him to take another look.
Even if the 9th Circuit decision is upheld, though, it's not that clear that the Nevada case will provide the go-ahead for Arizona to pursue each and every claim it has against Kalshi.
The new ruling deals only with efforts by Nevada to regulate gambling on sporting events. And that is an element of the Arizona case, but Mayes also charged Kalshi with violating a separate law that bans games of chance that involve money.
That covers other things on which Kalshi takes bets, like who will win an Oscar for best actor or what will be the high temperature on a certain date.
There also is another Arizona law that specifically outlaws all wagering on elections.
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