In a recent ruling, a federal judge in Nevada denied an injunction that would have permitted Crypto.com to continue offering sports event contracts within the state. This decision comes despite earlier favorable treatment for Kalshi, another entity in the same sector, which was granted an injunction by the same judge, Justice Andrew Gordon, in April.
Crypto.com initiated its lawsuit against the state in the U.S. District Court for the District of Nevada, seeking to block a cease-and-desist order from the Nevada Gaming Control Board issued earlier in May. In June, the company filed for the injunction, stating that their operations should not be halted based on state gaming laws.
On Thursday, the court announced that it would not grant Crypto.com’s request for an injunction. This decision stands out particularly because Justice Gordon had previously ruled in favor of Kalshi, indicating that the prediction market had demonstrated a strong likelihood of prevailing in its case. He cited the Commodity Exchange Act, which he interpreted as granting the Commodity Futures Trading Commission (CFTC) “exclusive jurisdiction” over such contracts, implying that state-level regulations should not apply.
In his remarks on the Kalshi injunction, Justice Gordon emphasized maintaining the status quo, suggesting that forcing Kalshi to cease operations would harm its reputation and financial standing. Earlier this week, the CFTC communicated to regulated firms involved in sports event contracts that it has not yet determined their legality, signaling uncertainty in the regulatory landscape.
Crypto.com relied heavily on the arguments established in the Kalshi case, asserting that its contracts should also fall under the CFTC’s exclusive jurisdiction and contending that the existence of gambling around sporting events does not inherently classify contracts related to those outcomes as gambling.
While the court has not disclosed its full decision, experts speculate that one potential reason for denying Crypto.com’s injunction could revolve around the classification of sports event contracts as “swaps.” According to the Commodity Exchange Act, swaps are defined as financial products associated with potential financial outcomes, leading to ongoing debates regarding whether these sporting contracts meet that definition.
Legal discussions surrounding this case have intensified on social media, with attorney Daniel Wallach suggesting that the court concluded Crypto.com’s sports event contracts do not qualify as swaps, indicating a significant factor in the ruling.
It’s noteworthy that while Kalshi was granted an injunction in Nevada, it faced a different outcome in Maryland, where a judge denied its request based on interpretations of the CFTC’s jurisdiction relative to state gambling regulations.
In response to the court’s ruling, Crypto.com announced its intention to appeal the denial to the U.S. Circuit Court of Appeals for the Ninth Circuit, asserting confidence that discrepancies in rulings on similar issues will lead to a favorable outcome. The company reaffirmed its stance that its contracts are indeed swaps under the CFTC’s exclusive jurisdiction and expressed eagerness for the appellate proceedings.
As the legal landscape surrounding sports event contracts continues to evolve, the Ninth Circuit will eventually need to address the growing complexities and implications of these cases, most notably since Nevada did not appeal Kalshi’s earlier injunction.
