Kalshi made a valiant attempt to argue to the Nevada District Court that the lawsuit the group filed against Nevada state gaming regulators does not require any fact-finding, but a judge did not agree.
In most lawsuits, discovery is a necessary period for each party to obtain information and evidence related to the case at hand. In this instance, the Nevada Gaming Control Board wanted information regarding how Kalshi operates and the sports event contracts it offers.
Kalshi wanted judgment based purely on the law
Kalshi wanted to stay discovery and sought summary judgment in the case based purely on the legal merits of the argument. In filings, the company suggested the court does not need anything more than the letter of the law to determine that the Commodity Futures Trading Commission (CFTC) has sole regulatory oversight over contracts offered by a designated contract market (DCM).
Both the regulator and the Nevada Resorts Association (NRA), which is an interested party in the case, fought against this notion and argued that discovery was necessary. Kalshi argued that, in the case of the NRA in particular, discovery was a flimsy excuse to peek under the hood of what the group said is a competitor in the casino space.
Ultimately, Judge Brenda Weksler concluded that discovery is required in the case. In her decision, she cited the definition of a “swap” as a good example where further information is necessary to draw a conclusion. Kalshi has argued in numerous filings across cases that there are plenty of results in sporting events that have an economic impact, a necessary element to qualify as a swap.
Judge says NV regulators have right to discovery
Weksler noted the potential catch-22 of this argument that, just because it is listed on a DCM and the CFTC has not taken action against it, does not automatically make it a legally acceptable swap.
“Defendants should not be forced to accept Plaintiff’s conclusion that contracts offered on its DCM have independent real-world consequences and thus, fall under the exclusive jurisdiction of the CFTC,” she noted. “And, given Kalshi’s ability to self-certify contracts, Defendants should not be required to accept as a fait accompli that ‘the CFTC has taken no action to bar Kalshi’s contract on the grounds that they are not swaps.'”
The ruling also said it was fair to ask for discovery to ascertain how possible it is for Kalshi to potentially comply with both state and federal laws regarding sports betting and event contracts, as the company has argued it would be detrimental to business to try to satisfy both.
The motion for summary judgment is still pending, but Weksler did note that in order for the defendants to oppose summary judgment, discovery was necessary. So, the next step in the process for both groups is to develop a schedule for the discovery process moving forward.
