During a hearing in San Francisco, representatives from the Nevada Gaming Control Board and the Nevada Resort Association asserted the state’s authority to regulate gambling, as they faced off against the federal government and prediction market platforms. The three-judge panel of the Ninth Circuit Court of Appeals, appointed by former President Trump, seemed to lean in favor of Nevada’s stance.
This case is part of a broader legal struggle involving states, prediction markets, and the Trump administration, which claims that such platforms fall solely under the jurisdiction of the Commodities Futures Trading Commission (CFTC) and are permissible under the Commodity Exchange Act (CEA) to accept bets on sports events. The federal entities argue that they preempt state laws, including those of states that ban gambling altogether.
Nevada, represented by attorney Nicole Saharsky, countered this claim, arguing that the CEA does not exhibit the necessary intent to override state legislation. The judges are reviewing consolidated appeals from prediction platforms such as North American Derivatives Exchange Inc. (Crypto.com), Kalshi, and Robinhood Derivatives LLC, all of which are contesting Nevada’s prohibition of their betting markets.
The outcome of this case is particularly significant given the Trump family’s vested interests. Trump Media is preparing to launch its own prediction platform, Truth Predict, while Donald Trump Jr. has connections to Polymarket and Kalshi, two of the leading platforms in this sector.
Central to the debate is the classification of sports event contracts and whether they should be considered swaps under CFTC regulation. The CFTC maintains that these contracts fall under its jurisdiction, while Nevada asserts that they constitute illegal bets according to state law.
Saharsky warned that a ruling favoring the federal position could drastically alter the legal landscape, stripping states of their regulatory powers and jeopardizing a significant portion of Nevada’s revenue, which heavily relies on gaming taxes. She emphasized a 2011 federal rule that prohibits trading on various unlawful activities, including gaming, claiming that it underlines Nevada’s authority in this matter.
Judge Ryan Nelson appeared to resonate with Nevada’s perspective, remarking on the explicit language of the federal rule and implying that it contradicts the appellants’ interpretations. However, representatives for the prediction markets contended that the CFTC’s oversight was merely advisory and that their platforms had not sought formal approval from the commission.
The discourse further explored the implications of the 2010 Dodd-Frank Act, which extended the CFTC’s regulatory reach. Nelson indicated that the prediction platforms should have sought CFTC approval for sports betting, noting that doing so would have simplified their operations, especially given the stakes involved.
This hearing marks another chapter in an ongoing legal battle. Last year, the Nevada Gaming Control Board issued a cease-and-desist letter to Kalshi when it attempted to initiate a sports betting pool. Kalshi’s subsequent legal actions resulted in an initial favorable ruling from a federal judge, but the Ninth Circuit’s rejection of Kalshi’s appeal opened the door for Nevada to pursue state legal action.
More recently, a Nevada judge upheld the Gaming Control Board’s request to temporarily prevent Kalshi from accepting bets in the state. To complicate matters further, a separate ruling from the Third Circuit Court of Appeals favored Kalshi by stating that sports event contracts qualify as swaps and are subject exclusively to CFTC oversight.
Despite these conflicting rulings across jurisdictions, Saharsky argued that they overlook essential legal principles, prompting the panel to announce that they would issue a ruling on the appeals expeditiously. This case continues to unfold, highlighting the tug-of-war between state authority and federal oversight in the evolving landscape of gambling regulation.
