Nevada gaming regulator seeks contempt ruling against Kalshi
The Nevada Gaming Control Board (NGCB) has asked a state court to hold prediction market operator Kalshi in contempt, alleging the company failed to comply with a court order requiring it to block users located in Nevada from accessing sports, election and entertainment event contracts.
In a filing submitted to the First Judicial District Court of Nevada, the regulator argued that Kalshi had not complied with the 18 May order directing the company to geofence its operations and prevent anyone physically located within the state from accessing covered event contracts.
“The Court has required Kalshi to stop offering covered event contracts in Nevada. We will continue to vigorously enforce Nevada law to safeguard gaming in our state,” Mike Dreitzer, NGCB Chairman, said.
According to the regulator, sports event contracts and certain other event-based contracts constitute wagering activity under Nevada law. It maintains that Kalshi’s operations violate multiple provisions of the state’s gaming statutes.
Geofencing dispute moves centre stage
The contempt application centres on Kalshi’s geofencing system, which Nevada claims remains inadequate despite the court’s order.
US gaming attorney Daniel Wallach highlighted on LinkedIn that Judge Jason Woodbury amended the original injunction on 18 May, replacing what he described as “easily-circumvented” residency language with stronger wording prohibiting Kalshi from offering the contracts to persons physically located within Nevada.
Court filings cited by Wallach suggest Kalshi opted to develop its own geolocation technology rather than use an established third-party provider.
According to excerpts from Nevada’s filings, Kalshi’s legal team informed the state that the company had chosen to develop its own geolocation and geofencing system and had tested it by asking “family and friends” in Nevada to try to place wagers through the platform.
The filing further states: “Kalshi instead has decided to rely on its own homegrown geolocation and geofencing technology, with ad hoc testing through family and friends, rather than implementing a proven solution from a third-party vendor that has been rigorously tested.”
Nevada argues that Kalshi’s decision to build its own system makes thorough testing even more important to ensure it effectively blocks users located within the state.
Questions raised over geolocation costs
Another issue highlighted in the Nevada filings concerns the cost of Kalshi’s geofencing solution.
According to Wallach, the company allegedly spent only $190,000 developing, implementing and testing its internal system. The figure contrasts with arguments Kalshi have previously presented in court proceedings elsewhere in the US.
Wallach noted that Kalshi previously argued in litigation that implementing geofencing through a third-party provider could cost “up to tens of millions of dollars annually,” a claim the company used to support arguments of irreparable harm when seeking preliminary injunctions in other jurisdictions.
Legal pressure grows despite integrity reforms
The contempt proceedings arrived only days after Kalshi announced a new market integrity framework to strengthen oversight across its platform.
Last week, the company said it introduced enhanced surveillance measures, including risk scoring for markets, employer disclosure requirements for participants in higher-risk contracts and additional insider-trading controls. Kalshi said the reforms followed recommendations from its independent Surveillance Audit Committee and came amid increased scrutiny of prediction markets across sports, politics and global events.
National debate over prediction markets intensifies
The Nevada contempt filing comes amid a broader regulatory battle over the future of prediction markets in the U.S.
Last week, the American Gaming Association criticised a proposed rulemaking by the Commodity Futures Trading Commission (CFTC) that would establish a new framework for reviewing event contracts, including those tied to sporting events.
AGA President and CEO Bill Miller argued that the proposal risks further blurring the distinction between sports betting and federally regulated prediction markets.
“It makes a mockery of congressional intent while going against a bipartisan coalition of 41 Attorneys General, countless legislators across the country, and the 81 per cent of voters who recognise that the so-called ‘prediction markets’ are backdoor sportsbooks evading state and tribal law,” Miller said.
The CFTC has defended its proposal, saying it would create a transparent process for assessing whether event contracts involve activities prohibited under the Commodity Exchange Act, including gaming and conduct that may be unlawful under federal or state law.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” Selig said.
The proposal does not prohibit sports-related event contracts outright, but suggests that certain products, including highly specific micro-betting markets, player-injury contracts, and wagers tied to officiating decisions, could face closer scrutiny.
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