Kalshi agreed Friday to fully shut down its operations in Nevada after admitting that people in the state were still able to access its event contracts despite a court order to geoblock the state.
The Nevada Gaming Control Board (NGCB) announced last week an agreement with the leading prediction market platform wherein the company will stop offering sports and other event contracts within Nevada borders as of Aug. 12 at the latest, geoblocking the state through a solution provided by GeoComply.
In accordance with a joint stipulation and proposed order in a Carson City court, if Kalshi does not fulfill the commitment to “definitively stop” its operations in Nevada, it will either have to pay a penalty of $120,000 per day until it does so or provide a sufficient explanation of why it cannot implement the full geofencing solution.
Full Nevada geoblock would avoid contempt issue
The First Judicial District Court in Carson City issued a preliminary injunction against Kalshi earlier this year. Despite that order to block access to sports, election, or entertainment event contracts within the state, the NGCB said in June that its investigators repeatedly were able to access and trade on those markets.
The regulator asked a state court judge to hold Kalshi in contempt of court, writing that the company “continues to flagrantly violate” the court order. The NGCB also alleged that Kalshi’s court filings showed that the firm spent around $190,000 on a “homegrown” geofencing system that uses internet protocol (IP) addresses, which it argued was insufficient for the purposes of the court order and the injunction.
A Kalshi spokesperson told SBC Americas that the initial geofencing solution it implemented constituted compliance with the court order.
However, the company now agreed to take further steps to implement “a robust, multi-source geofencing solution” provided by GeoComply. Licensed sportsbooks across the U.S. and beyond use similar technology from GeoComply and similar providers to comply with state legislation and regulations.
Kalshi previously argued in multiple court cases involving state regulators that implementing full geoblocking software would be prohibitively expensive.
Kalshi admits Nevadans could still access prediction markets
The July 23 joint stipulation in court notes that Kalshi admitted NGCB investigators had been able to trade on event contracts from within the state, in violation of the court’s previous order. However, the operator did not concede that those trades amount to cause for an order of contempt, the filing added.
NGCB Chairman Mike Dreitzer said in the regulator’s press release that the new agreement “will ensure that Kalshi fully complies with Nevada law moving forward, or it will face stiff penalties.”
The agreement also resulted in the cancellation of a contempt of court hearing scheduled for this week.
Nevada court references Kalshi’s Michigan developments
Nevada is not the only state in which a court ordered Kalshi to geoblock access.
Michigan obtained a geolocation order earlier this year, with similar daily financial penalties attached. In that state, Kalshi was ordered to void and refund all pre-existing trades, as well as preventing the possibility of future event contract activity.
However, in a measure that multiple former Commodity Futures Trading Commission (CFTC) counsels called “extraordinary”, the CFTC directly ordered Kalshi to defy the Michigan court’s instruction and instead fulfill all outstanding trades in the state. Kalshi Head of Enforcement Robert DeNault said the conflicting instructions from the court and the federal regulator left the company in “an impossible position”.
The Nevada joint stipulation ended with a note that the agreement will not be affected by proceedings or findings in any other state, including Michigan.
