Crypto.com has officially ceased offering sports event contracts in Nevada, becoming the first prediction market to do so following a federal court ruling. The decision comes after the U.S. District Court for the District of Nevada denied Crypto.com an injunction that would have allowed it to continue its operations in the state. As a result of this decision, the sports event contracts are now effectively banned in Nevada.
Crypto.com is planning to appeal the decision, although no formal appeal has been filed yet. Following a notification from the Nevada Gaming Control Board last week, the platform removed these event contracts from its app on Monday. While the contracts remained visible on Crypto.com’s website, attempts to place bets were met with an “insufficient funds” error, despite users having sufficient balances.
The implications of this ruling could extend to Kalshi, another prediction market that previously received a favorable injunction from the same judge in a related case. Judge Andrew P. Gordon granted Kalshi’s motion to allow its contracts to remain active in Nevada, raising questions about why different rulings were issued for the two firms. Nevada officials are leveraging the Crypto.com decision to push for the dissolution of Kalshi’s injunction.
In a recent filing, Kalshi firmly opposed the state’s motion to lift the injunction, arguing that the move was “procedurally improper and lacks substantive merit.” Kalshi’s legal team emphasized that if Nevada believes it is entitled to judgment, the appropriate course of action would be a motion for summary judgment rather than a request to revisit the injunction.
A crucial aspect of the ongoing legal discourse is whether sports event contracts fall under the definition of “swaps,” a type of financial instrument overseen by the Commodity Futures Trading Commission (CFTC). Kalshi asserts that the CFTC has jurisdiction over its contracts, while Nevada maintains that these contracts do not qualify as swaps.
This legal definition is pivotal, as the Commodity Exchange Act (CEA) outlines “swaps” to include agreements dependent on whether a contingency occurs, encompassing a wide variety of bets. Judges have differing views on what constitutes an event versus an outcome, complicating the legal landscape. Judge Gordon took a narrower stance, suggesting that an event is a significant occurrence within a set timeframe rather than the outcome derived from that event.
Kalshi has countered that this interpretation challenges the logical basis underlying CFTC jurisdiction, arguing that it risks creating inconsistencies based on semantics. Furthermore, Kalshi argued there hasn’t been a substantial change in case facts or laws to justify dissolving the injunction.
Rounding out the legal complexities, Kalshi has expressed that any debate on whether the contracts are categorized as swaps should be addressed directly with the CFTC, rather than through litigation against its own market.
In addition to its conflicts with Nevada, Kalshi and Robinhood are engaging in a separate legal matter involving the Indian Gaming Regulatory Act, which sought to regulate their activities on tribal lands in California. In their filings, the companies claim that the tribes involved lack jurisdiction over their operations and are responding to their business practices with exaggerated claims. A ruling in this case has the potential to influence gaming regulations across many tribal jurisdictions.
While prediction markets like Kalshi and Crypto.com wrestle with evolving legal definitions and state-level pushback, the landscape of digital betting continues to face scrutiny and legal challenges across the United States, with implications that could set far-reaching precedents.
