Derivatives exchange Crypto.com has walked in Kalshi’s footsteps by filing a lawsuit in federal court against Nevada’s gaming regulator regarding sports contracts.
The suit, which was filed in the U.S. District Court for Nevada on Tuesday, names Nevada Gaming Control Board (NGCB) Chairman Kirk Hendrick and other board officials as defendants.
Crypto.com | Derivatives North America (CDNA) seeks a permanent injunction against the NGCB, arguing that the board is over-stepping its bounds by trying to shut down Crypto’s sports contracts.
The regulator sent Crypto.com a cease-and-desist letter on May 20 alleging that its dalliance in sports trading equates to illegal sports wagering. The NGCB threatened Crypto.com with criminal and civil penalties if it did not comply.
‘No authority to regulate, let alone prohibit’
Crypto.com has gone on the counter-offensive.
As multiple prediction market operators have done in the past, Crypto.com stressed that its position is that the Commodity Futures Trading Commission (CFTC) has “exclusive jurisdiction” to regulate derivatives markets, not state gaming regulators.
“Nevada has purported to assert jurisdiction over CDNA, a federally regulated designated contract market (DCM), on the mistaken premise that contracts traded on the DCM constitute ‘wagering on sporting events’ subject to Nevada gaming laws,” reads the suit.
“But the NGCB has no authority to regulate, let alone prohibit, derivatives trading offered by a federally regulated DCM operating pursuant to federal law.”
This is not the first legal action Crypto.com has taken against a state over an attempt to block its sports contracts. In late April, it followed Kalshi in suing Maryland Lottery and Gaming in Maryland District Court. In that case, Maryland asked for and received an extension, and responses are now due at the end of June.
Crypto.com emboldened by Kalshi decisions
In addition to Maryland, Kalshi has also sued the NGCB, as well as the gaming regulator in New Jersey.
It has had some success. In April, the same Nevada court that Crypto.com has just filed in granted Kalshi operator a temporary restraining order against the NGCB, with the judge determining that “plain and unambiguous language grants the CFTC exclusive jurisdiction” over event contracts including sports, meaning that Kalshi is in no violation of state law.
This week, the court approved the Nevada Resort Association’s request to intervene. But, in the meantime, Kalshi can remain fully operational in Nevada.
In addition, two separate courts ruled in favor of Kalshi in its filing against the New Jersey Division of Gaming Enforcement, with one of those judges noting he was partly influenced by the Nevada verdict.
Crypto.com appears to have been watching carefully, as it referenced all of these cases in its Nevada lawsuit and posited that the decisions in Nevada and New Jersey are “directly applicable” to its own situation in Nevada.
“The NGCB’s cease-and-desist letter failed to acknowledge CDNA’s status as a federally regulated and CFTC-registered DCM and the fact that the activities it seeks to regulate fall squarely within the scope of federal oversight,” wrote Crypto.com. “It also failed to acknowledge that it had been enjoined by this Court from applying the same state laws against Kalshi.”
Ultimately, Crypto.com seeks a permanent injunction to stop Nevada from “improperly” enforcing its gaming laws against sports contracts. It also wants a judge to confirm that federal law preempts state gaming authority over CFTC-regulated event contracts.
