Kalshi has scored what its CEO called “another big legal victory” as a federal court dismissed several Nevada parties’ motion to dismiss the prediction markets operator’s lawsuit.
Tarek Mansour’s company is suing the Nevada Gaming Control Board (NGCB), the Nevada Gaming Commission (NGC) and Nevada’s Attorney General in response to the state’s attempts to prevent it from offering sports event contracts, which they assert are tantamount to illegal wagering.
The crux of Kalshi’s counter-argument is that the Commodity Exchange Act (CEA) gives the Commodity Futures Trading Commission (CFTC) federal authority to oversee sports and other events contracts which supersedes state law.
This week, U.S. District Court for the District of Nevada judge Andrew Gordon issued an order which denied the defendants’ motion to dismiss.
Kalshi’s suit did not name the State of Nevada itself as a defendant, and Gordon noted that this was one of the defendants’ arguments for a dismissal, as they claimed this rendered the lawsuit invalid as this court did not have subject matter jurisdiction.
The defendants’ request also invoked the Eleventh Amendment. The NGCB and NGC argued that they are political subdivisions of the State of Nevada with immunity under the amendment. They assert they have not waived that immunity as they notified the court and Kalshi from the outset that they intended to raise this defense, and because they “sought only to restore the status quo before Kalshi started violating Nevada gaming laws” and filed no complaint or counterclaim against Kalshi.
Defendants ‘did not act solely in defense’
However, Gordon wrote that both of those arguments fail for the same reason: because the defendants invoked the Nevada court’s authority in requesting injunctive relief in their favor.
“The NGC and NGCB did not act solely in defense,” wrote Gordon. “They also requested affirmative relief by filing their own motion for a restraining order against Kalshi … “Nothing required the NGC and NGCB to move for injunctive relief in their own favor. They could have simply opposed Kalshi’s motion and retained a defensive posture.
“By voluntarily invoking this court’s power, the NGC and NGCB clearly indicated that they waived their Eleventh Amendment immunity.”
“The defendants’ argument that Kalshi’s suit must be dismissed for failure to name the State fails for the same reason as the Eleventh Amendment immunity argument fails. By invoking this court’s authority in requesting injunctive relief in their favor, the defendants
waived their argument that the State was not properly named to invoke the State’s waiver of sovereign immunity.”
Mansour hails ‘victory’
Gordon’s decision this week means the Nevada court case continues, and we still may be a long way from the final verdict on Kalshi’s sports offerings in Nevada. Just this week, the court approved the Nevada Resort Association’s request to intervene in the case.
But, for now, Mansour took to social media on Thursday to laud the latest decision.
“Kalshi secured another big legal victory today in Nevada,” Mansour wrote. “It feels like I am saying this every week.”
In April, Gordon granted Kalshi a temporary restraining order against NGCB and determined that “plain and unambiguous language grants the CFTC exclusive jurisdiction” over event contracts including sports. In this week’s latest ruling, Gordon referred back to that decision, noting that Kalshi has “plausibly alleged” that the CEA preempts Nevada gaming laws.
In New Jersey, Kalshi’s filing for injunctive relief against the New Jersey Division of Gaming Enforcement was also granted, with a Garden State judge noting he was influenced in part by the April Nevada verdict.
While all this is going on, Kalshi’s fellow derivatives operator Crypto.com is now also suing Nevada authorities. In its application for a permanent injunction this week, Crypto.com said the Nevada and New Jersey decisions are “directly applicable” to its own situation.
