Nevada Seeks Contempt Order Against Kalshi Operations

Nevada gaming regulators have intensified their legal challenge against prediction market operator Kalshi, asking a state court to hold the company in contempt over what they describe as continued violations of a court-ordered restriction on its activities within the state.

The Nevada Gaming Control Board (NGCB) filed its request with the First Judicial District Court, arguing that Kalshi has failed to comply with a May 18 court order requiring the company to prevent individuals physically located in Nevada from accessing certain event-based contracts. The regulator is also seeking substantial financial sanctions as part of the enforcement action.

“The Court has required Kalshi to stop offering covered event contracts in Nevada. We will continue to vigorously enforce Nevada law to safeguard gaming in our state,” said Nevada Gaming Control Board chairman Mike Dreitzer in a press release (pdf).

According to the NGCB, investigators repeatedly confirmed that Nevada residents can still access Kalshi’s platform and purchase contracts tied to sports, elections and entertainment events despite the court’s directive.

Court Dispute Focuses on Access Restrictions

At the center of the latest filing is a disagreement over the effectiveness of Kalshi’s geofencing measures. Nevada regulators contend that the company has not taken sufficient steps to block users within state borders from participating in covered event contracts.

The regulator stated in court documents that “People located within Nevada are easily able to go to Kalshi’s platform and purchase Kalshi’s sports-, election- and entertainment-related contracts.”

The filing further asserts that investigators have verified this accessibility multiple times since the initial application was submitted. Nevada maintains that these contracts constitute wagering activity under state law and therefore fall under gaming regulations.

Legal observers have pointed to changes made by Judge Jason Woodbury when he revised the preliminary injunction on May 18. Gaming attorney Daniel Wallach noted that the judge replaced language based on residency with broader restrictions focused on a person’s physical location within Nevada. The adjustment was intended to strengthen enforcement and reduce opportunities to bypass the order.

Questions Surround Kalshi’s In-House Geolocation System

Nevada’s latest arguments devote significant attention to the technology Kalshi uses to identify user locations.

Court filings referenced by Wallach indicate that Kalshi chose to build its own geolocation and geofencing tools rather than adopt services from an established third-party provider. According to the filings, company representatives told state officials that testing included asking “family and friends” located in Nevada to attempt transactions through the platform.

The filing states: “Kalshi instead has decided to rely on its own homegrown geolocation and geofencing technology, with ad hoc testing through family and friends, rather than implementing a proven solution from a third-party vendor that has been rigorously tested.”

Nevada argues that this approach requires especially careful validation to demonstrate that users located within the state are effectively blocked. Regulators also criticized the company’s reliance on internet protocol addresses, describing such methods as unreliable for accurately determining a user’s location.

According to the NGCB, Kalshi spent approximately $190,000 developing, implementing and testing its internal solution. The regulator contrasted that figure with previous arguments made by the company in litigation elsewhere in the United States. Wallach noted that Kalshi had previously argued that using a third-party geofencing provider could cost “up to tens of millions of dollars annually,” a position the company cited while seeking preliminary relief in other legal disputes.

Nevada contends that commercially available geofencing systems already exist and that Kalshi has declined to adopt them despite their established track record.

Broader Debate Over Prediction Markets Continues

The contempt request arrives during a period of heightened scrutiny for prediction markets across the country.

Only days before the Nevada filing, Kalshi announced a new market integrity framework aimed at strengthening oversight. The company introduced additional monitoring measures that include market risk scoring, disclosure requirements for participants involved in higher-risk contracts and expanded controls designed to address insider-trading concerns. Kalshi said the changes followed recommendations from its independent Surveillance Audit Committee.

At the national level, debate continues over how prediction markets should be regulated. The controversy has drawn attention to a proposed rulemaking by the Commodity Futures Trading Commission (CFTC) concerning event contracts, including those linked to sporting events.

The American Gaming Association has criticized the proposal. AGA President and CEO Bill Miller argued that the plan would further blur the line between state-regulated sports betting and federally regulated prediction markets.

“It makes a mockery of congressional intent while going against a bipartisan coalition of 41 Attorneys General, countless legislators across the country, and the 81% of voters who recognize that the so-called ‘prediction markets’ are backdoor sportsbooks evading state and tribal law,” Miller said.

The CFTC has defended its proposal, stating that it would establish a transparent process for determining whether event contracts involve activities prohibited under the Commodity Exchange Act or conduct that may be unlawful under federal or state law. While the proposal does not ban sports-related event contracts, it indicates that products such as player-injury contracts, officiating-related wagers and highly specific micro-betting markets could receive additional regulatory scrutiny.

Nevada’s contempt application now adds another layer to the ongoing legal and regulatory battle surrounding prediction markets, with the state seeking court intervention to compel compliance while broader questions about the industry’s future continue to unfold across the United States.