Kalshi’s Momentum Fuels Crypto.com’s Fight Over Sports Markets

Kalshi’s recent court victories have given at least one other provider of sports event contracts ammo for its own legal battle.

Crypto.com argued Thursday that its sports offerings, just as Kalshi has contended, fall under the exclusive authority of the Commodity Futures Trading Commission, and that a cease-and-desist order from the Nevada Gaming Control Board represents an “existential threat” to its business.

The argument comes amid a bit of a legal losing streak for the Nevada Gaming Control Board. Earlier this week, U.S. District Court Judge Andrew P. Gordon denied a motion to dismiss Kalshi’s lawsuit against the Nevada Gaming Control Board, saying “for now, it suffices to say that Kalshi has plausibly alleged the [Commodity Exchange Act] preempts Nevada gaming laws for the reasons outlined in my preliminary injunction order.”

The preliminary injunction order he is referring to, issued in early April, was significant in that it stopped the state gaming regulator from blocking Kalshi’s sports event contracts while the lawsuit plays out. The denial does not mean the end of the Nevada case. In fact, the day before the judge ruled on the motion to dismiss, he allowed the Nevada Gaming Control Board and the Nevada Resort Association—a gaming and resort industry trade group—to intervene in the suit.

Sports “prediction” markets like those offered by Kalshi and Crypto.com have come under the spotlight because of how similar they seem to sports betting, which is regulated on a state-by-state basis. Those companies—and others, like Polymarket—allow users to “trade” on the outcome of sports events, like which team will win the NBA Finals, which NHL team will win the Stanley Cup, or which player will be MVP in either of those championships.

The biggest sports betting companies in the world, including DraftKings and FanDuel, have acknowledged they are keeping tabs on the space and could potentially seek to enter the market at some point.

There’s a key distinction between sports betting and sports prediction markets, according to the companies that have these offerings: where typical wagers placed have users betting against “the house”—casinos or sportsbooks that set the odds and profit when bettors lose—sports prediction markets offer nationwide marketplaces where users trade against each other.

According to Kalshi and Crypto.com—which is a cryptocurrency exchange and financial services platform—the CFTC has exclusive jurisdiction to regulate their sports event contracts through the Commodity Exchange Act—a federal law which Judge Gordon referred to in his decision denying the Nevada Gaming Control Board’s motion to dismiss. That law regulates the trading of commodities like grains and oil, but also less obvious commodities, such as sports when considered in a trading context. Crypto.com launched its sports offerings in December.

Kalshi has racked up early victories in Nevada, but that’s just one of at least seven states that have sought to stop it from offering sports event contracts. Nevada, New Jersey, Illinois, Maryland, Ohio, Montana and, most recently, Arizona, have also issued cease-and-desist orders to Kalshi. At least some of those states have also taken aim at other operators of sports prediction markets, including Robinhood and Crypto.com.

Kalshi has taken a particularly aggressive approach to dealing with the cease-and-desists: It has sued state regulators in Nevada, Maryland, and New Jersey.

To date, the judge handling the Maryland case has not seemed as receptive to Kalshi’s arguments as the judge in Nevada, although no ruling has been made in that suit yet. During a late May hearing, the judge questioned why Kalshi has changed the way it describes its prediction markets since winning a high-profile lawsuit in the D.C. Circuit last year over the legality of its offerings allowing users to trade on the outcome of political events like the U.S. presidential election. 

Legal experts have put forth multiple lines of attack state regulators can try in court, pointing to laws like the Wire Act, which prohibits interstate transmission of information that assists in the placing of wagers on any sporting event or contest, and the Indian Gaming Regulatory Act, which permits federally recognized Native tribes to operate gaming facilities on tribal lands, but only under certain conditions.

Representatives for Kalshi, Crypto.com, and the Nevada gaming regulator did not immediately respond to requests for comment. The Maryland Lottery and Gaming Control Commission declined to comment.