Wave of Filings Expands Prediction Market Legal Battles Across New York, Kentucky, Nevada, and New Mexico
A newly formed industry coalition emerged, Nevada escalated its fight with Kalshi, and the CFTC continued its campaign against state prediction market restrictions.
Prediction market litigation intensified Friday, June 12, as federal regulators, exchange operators, and state officials filed a series of actions across four states. The actions included a CFTC lawsuit against New Mexico, a challenge to New York regulators by Crypto.com’s prediction market platform, a Kentucky tax lawsuit brought by a newly formed industry coalition, and a Nevada request seeking contempt sanctions against Kalshi.
CFTC Challenges New Mexico
The CFTC filed suit against New Mexico following the state’s recent legal action against Kalshi and amid a separate challenge brought by tribal gaming interests.
As with similar cases, the federal agency argues that Congress granted it exclusive authority over event contracts traded on federally regulated designated contract markets. It states that New Mexico cannot apply its gambling laws to those transactions.
The lawsuit makes New Mexico the latest state to face a CFTC challenge. Previously, the agency sued Illinois, Arizona, Connecticut, New York, Wisconsin, Minnesota, and Rhode Island.
The CFTC also filed amicus briefs in cases in Massachusetts, Ohio, and Nevada.
Nevada Seeks Contempt Finding Against Kalshi
The Nevada Gaming Control Board asked a state court to hold Kalshi in contempt. The regulator argues that the company has failed to comply with a May 18 preliminary injunction requiring it to stop offering contracts for sports, election, and entertainment-related events to individuals located in Nevada.
According to court filings, investigators purchased covered event contracts on multiple occasions between May 28 and June 1 while physically located in the state. The contracts included wagers tied to NBA playoff games, MLB games, tennis matches, and other events.
Nevada argued that Kalshi’s geofencing efforts remain inadequate and asked the court to impose sanctions, including disgorgement of profits earned from Nevada transactions or daily monetary penalties until compliance is achieved.
In a press release, the Board said Kalshi had not complied with the court’s order and reiterated its position that sports-event contracts constitute wagering activity under Nevada law.
Crypto.com’s Platform Sues New York
Crypto.com’s North American Derivatives Exchange (Nadex) filed suit against New York Attorney General Letitia James and the New York State Gaming Commission.
The complaint seeks declaratory and injunctive relief. It argues that federal law preempts New York’s gambling laws when applied to event contracts traded on federally regulated exchanges.
Nadex points to New York’s ongoing litigation against Gemini and Coinbase. It states the lawsuits are evidence that enforcement action against the platform is imminent.
The filing argues that the CFTC has exclusive authority over federally regulated designated contract markets. It further states that New York cannot apply its gambling laws to those products.
New Coalition Challenges Kentucky Tax
A newly formed prediction market trade association, the Coalition for Fair Markets, filed suit in Kentucky. The complaint challenges the state’s recently enacted prediction market tax and related restrictions on gaming operators.
The Coalition for Fair Markets includes Kalshi, Nadex, and Polymarket US. Notably, Polymarket is not part of the separate Coalition for Prediction Markets, while Kalshi and Nadex are. That trade group has distanced itself from Polymarket on multiple occasions, calling it “offshore.”
The lawsuit challenges Kentucky’s 14.25% tax on prediction market transaction fees. It also highlights the state’s lower 9.75% tax on horse track wagers.
The coalition argues that Kentucky’s measures are preempted by federal law and violate multiple constitutional protections. Those include the dormant Commerce Clause, equal protection guarantees, and the First Amendment.
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