Nevada sues betting market Kalshi, sparking legal clash with Trump administration

LAS VEGAS — Nevada gaming regulators and the state’s attorney general filed a lawsuit against prediction market Kalshi on Tuesday, alleging the company is operating an unlicensed sportsbook in violation of state law.

The lawsuit further claims that Kalshi provided services to individuals under the age of 21. The legal action follows a federal appeals court’s rejection of Kalshi’s request to block state-level prosecution.

The filing comes one day after the Trump administration asserted that the federal government holds exclusive authority to regulate the prediction market industry.

Prediction markets, which allow users to wager on sports, politics, and international conflicts, are currently experiencing a period of rapid growth. Kalshi reported that its revenue from this year’s Super Bowl was 27 times higher than the previous year, a surge that regulators suggest is impacting revenue at traditional Nevada casinos.

Kalshi and its competitor, Polymarket, maintain that they offer "event contracts" and should be regulated as financial instruments rather than gambling. The Trump administration and the Commodity Futures Trading Commission (CFTC) have signaled support for this interpretation.

Donald Trump Jr. serves as a paid advisor to Kalshi and is an investor in Polymarket. Despite the industry's growth, analysts have warned of risks involving insider trading, citing data showing that fewer than 0.04% of accounts on Polymarket account for more than 70% of the platform’s total profits.

Nevada’s legal challenge against Kalshi represents far more than a localized dispute; it is the epicenter of a high-stakes battle to define and control an emerging sector that sits at the volatile intersection of finance and gambling. At the heart of this confrontation is a fundamental regulatory question: Are prediction markets digital casinos or a new breed of financial exchange?

Nevada, home to the nation’s most robustly regulated gaming industry, maintains that these platforms facilitate illegal wagering and fall squarely under state jurisdiction. Conversely, the Trump administration and the Commodity Futures Trading Commission (CFTC) have categorized these instruments as "event contracts," asserting federal oversight. This federal pivot has invited scrutiny regarding potential conflicts of interest, particularly given Donald Trump Jr.’s public associations with both Kalshi and Polymarket. The CFTC chairman’s overt support for Kalshi, coupled with his critiques of "overzealous state authorities," suggests a coordinated federal effort to centralize control over a burgeoning and lucrative industry.

Beyond the jurisdictional tug-of-war, the most pressing concern involves the integrity of the markets themselves. Recent reports highlight a disturbing trend of large-scale bets placed immediately prior to major geopolitical events, including Israeli strikes on Iran and U.S. military actions in Venezuela. These anomalies underscore a significant national security risk: the potential for prediction markets to serve as conduits for insider trading. The ability of individuals with access to classified intelligence to monetize non-public information through these platforms poses a direct challenge to market transparency.

Ultimately, the Nevada litigation will serve as a landmark precedent. The court’s decision will not only determine the regulatory architecture of this nascent industry but will also redefine how the United States polices insider trading in an era where information—and the events it precedes—is increasingly traded as a commodity.