Nevada regulators and the state’s attorney general filed a lawsuit Tuesday against Kalshi, a New Jersey-based company, accusing it of operating a sports gambling market within the state without the required licenses. The lawsuit alleges Kalshi also offered its services to individuals under the age of 21, a violation of Nevada law. The legal action follows a recent ruling by the 9th Circuit Court of Appeals that allowed Nevada to pursue its case against the prediction market platform, according to the Nevada Independent.
The suit arrives amid a broader debate over the regulation of prediction markets, which allow users to wager on the outcomes of events ranging from sporting contests to political elections. Kalshi and its competitor, Polymarket, maintain their platforms facilitate “event contracts” and should be classified as financial investments, not gambling, and therefore subject to different regulatory oversight. This position has found an unlikely ally in the Trump administration.
In a Wall Street Journal op-ed and an amicus brief filed Tuesday, Commodity Futures Trading Commission (CFTC) Chair Michael Selig asserted the agency’s exclusive authority to regulate prediction markets. “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,” Selig wrote. This stance represents a departure from traditional state control over gambling, and has drawn scrutiny given the personal financial ties of members of the Trump family to the industry.
Donald Trump Jr. Serves as a paid advisor to Kalshi and an unpaid advisor to Polymarket. His family’s social media company, Truth Social, announced plans in January to launch its own prediction market platform. The timing of the Trump administration’s intervention has fueled concerns about potential conflicts of interest.
The rapid growth of prediction markets has also raised concerns about potential market manipulation and insider trading. Data analyzed by blockchain analyst DeFi Oasis reveals that a tiny fraction of Polymarket users – less than 0.04 percent – have captured over 70 percent of the platform’s total profits, exceeding $3.7 billion. Recent examples highlighted by The Guardian illustrate how individuals with apparent prior knowledge have profited significantly from bets on geopolitical events.
One Polymarket user reportedly made $128,000 betting on Israel’s military action against Iran, placing the wager before the actual strike occurred. The user’s account was traced to a location in northern Israel. Another user generated over $400,000 by correctly predicting the potential ousting of Nicolás Maduro in Venezuela, placing bets shortly before U.S. Intervention. A group of accounts with suggestive usernames – including “fmaduro” and “madurowilllose” – collectively earned over $161,000 by betting on María Corina Machado Parisca winning the Nobel Peace Prize.
Kalshi experienced a significant surge in activity during this year’s Super Bowl, processing 27 times more business than during the previous year’s game, according to Business Insider. This growth reportedly came at the expense of Nevada’s established gambling operations, which saw a decrease in revenue during the same period. Nevada regulators have expressed concern over Kalshi’s continued expansion, stating the company has not attempted to maintain a “status quo.”
As of Wednesday, the CFTC has not responded to requests for comment regarding the potential conflicts of interest surrounding the Trump family’s involvement in prediction markets. The lawsuit in Nevada is ongoing, and the outcome will likely set a precedent for the regulation of these increasingly popular platforms.
