Kalshi, a prediction market operator, is resisting Nevada’s efforts to force wide-ranging discovery in their ongoing legal fight. Kalshi argues that the information Nevada wants does not relate to the main question the court needs to answer: Does federal law trump state gambling rules?
Kalshi Argues Federal Oversight Trumps Nevada Gaming Laws in Ongoing Legal Fight
The US District Court for the District of Nevada is now handling this disagreement. It all started when Nevada said Kalshi’s sports event contracts should follow local gaming laws. Kalshi disagrees, saying the Commodity Futures Trading Commission (CFTC) is regulating it under the Commodity Exchange Act. They believe state-level limits do not apply to them. How this case turns out could help set boundaries on how much power states have over prediction markets that federal agencies regulate.
In papers filed last week, Kalshi slammed Nevada’s discovery demands, calling them too wide-ranging and not relevant to the issue at hand. The company argues that the only facts needed are whether its contracts are traded on an exchange designated by the CFTC, which it labels as “beyond dispute.” Nevada, on the other hand, claims that more proof is necessary to evaluate what Kalshi is offering, how it affects the economy, and how the company talks to regulators.
The state has also tried to get its hands on Kalshi’s internal documents, including records of self-certifications, marketing campaigns, consumer protection methods, and even its talks with the CFTC. Kalshi fired back, saying these demands are an attempt to dig into almost every part of its operations instead of focusing on the legal question of preemption.
The company also hinted that Nevada’s request for communications with federal regulators was meant to raise doubts about how well the CFTC oversees things.
Nevada Judge Approves Discovery Timeline Despite Kalshi’s Objections of Irreparable Damage
Kalshi cautioned that following through with discovery would cause irreversible damage. The company pointed out that once they hand over documents or answer questions, they cannot undo the consequences.
Nevada brushed off this concern, citing Kalshi’s $2 billion valuation as proof that the company could handle the costs. In response, Kalshi argued that a high valuation does not mean they have lots of cash on hand. They stressed that the price and exposure of discovery would still hurt them since people can already find the requested information on their website.
Despite Kalshi’s protests, Judge Brenda Weksler gave the green light to Nevada’s suggested discovery timeline in early July. She set the discovery deadline for October 31 and scheduled motions for mid-November. The court, though, did not rule out the possibility for Kalshi to ask for a pause in discovery while it goes after summary judgment.
This legal tussle is just one of many the company is dealing with across the country. Back in April, Kalshi managed to secure an order that lets it keep operating in Nevada. Meanwhile, similar cases in New Jersey and Maryland have moved up to federal appeals courts.