Nevada’s Gaming Watchdogs Are Cracking Down on Prediction Market Platforms

Nevada’s gambling regulators just sent a clear message to licensed sportsbooks across the state: tread carefully when it comes to prediction markets. In a letter delivered this week to operators, the Nevada Gaming Control Board reminded everyone that maintaining their good standing means following all applicable laws, not just in Nevada, but everywhere they do business. The warning comes as a growing number of platforms like Kalshi, Crypto.com, and Robinhood have begun offering what they call “event contracts” on everything from sports games to political elections, creating a regulatory showdown between state authorities and federally-regulated prediction market operators.

The real tension here boils down to a fundamental question: who gets to regulate these new-age betting products? Prediction market companies argue they fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), the federal agency overseeing derivatives trading. State regulators, on the other hand, see these offerings as sports betting in disguise and insist they belong under state gambling laws. This clash isn’t just about bureaucratic turf wars, it’s about billions of dollars in tax revenue, consumer protection standards, and the future of both traditional sports betting and emerging financial technology.

The Rules Nevada Is Laying Down

The Nevada Gaming Control Board pulled no punches in defining what they consider gambling under their purview. According to their announcement, any contracts based on sporting or athletic event outcomes fall squarely under state jurisdiction as wagering activities. This isn’t limited to traditional sports either. The board specifically named contracts tied to the World Series of Poker, the Academy Awards, esports competitions, and even political elections as activities requiring proper Nevada licensing.

A derivative contract or whatever you want to call it is nothing more than a sports wager

If you want to offer these products in Nevada legally, you need a nonrestricted gaming license with sports pool approval, and you must comply with all the state’s sports wagering requirements, including those governing wagering accounts and sportsbook systems. Breaking these rules means facing suitability reviews and potential disciplinary actions, even if the contracts are listed on a CFTC-regulated exchange.

Nevada Gaming Control Board member George Assad made the state’s position crystal clear at a recent board meeting. “A derivative contract or whatever you want to call it is nothing more than a sports wager,” Assad stated bluntly. As a retired Las Vegas Municipal Court judge, Assad didn’t mince words, adding that “every bet made in this town is a contract” and dismissing the industry’s terminology as “nothing more than a word salad”. His message to platforms like Kalshi and Crypto.com? “The gig is up.”

A Growing Regulatory Movement Across States

Nevada isn’t alone in pushing back against prediction market platforms. Ohio, Michigan, and Arizona have all issued warnings to gambling operators about venturing into this space. The Michigan Gaming Control Board sent a formal memo to commercial casinos, internet gaming operators, sports betting operators, and fantasy contest providers, making it clear that offering or facilitating sports event contracts could jeopardize their state licenses. Michigan’s warning extended beyond state borders too, cautioning that partnerships with entities offering these contracts in other jurisdictions could also trigger licensing reviews.

Ohio took decisive action back in March 2025, sending cease-and-desist orders to Kalshi, Robinhood, and Crypto.com. The Ohio Casino Control Commission didn’t stop there. In August, they warned licensed sportsbooks that offering sporting event futures contracts anywhere, inside or outside Ohio, could cost them their licenses. This move likely targeted operators like FanDuel, which announced plans to partner with the Chicago Mercantile Exchange to launch prediction market offerings.

Arizona’s Department of Gaming added another layer of complexity in September, warning that licensed operators could face licensing consequences if they partner with companies selling event contracts in jurisdictions where such activities violate local laws. This created a tangled web where operators must now track not just their home state’s rules, but regulatory actions across the entire country.

The core argument from state regulators remains consistent: prediction markets should be regulated at the state level, not by the federal CFTC. States point to their traditional authority over gambling, the need for consumer protections, and concerns about tax revenue being siphoned away by federally-regulated platforms that don’t pay state gambling taxes.

Kalshi Takes Ohio to Court

Kalshi didn’t take Ohio’s actions lying down. In early October 2025, the prediction market operator filed a federal lawsuit seeking a permanent injunction and declaratory relief against the Ohio Casino Control Commission. The company also requested an emergency temporary restraining order and preliminary injunction, arguing that the state regulator overstepped its authority by restricting Kalshi’s ability to sell event contracts tied to sports results.

In its lawsuit, Kalshi claimed the commission’s actions “threaten immediate and irreparable harm, not only to Kalshi but also to its clients and business partners.” The company argued that shutting down event contracts in Ohio would “jeopardize Kalshi’s sustainability” and require creating “intricate technological solutions that remain untested and uncertain.” Kalshi further contended that the state’s actions disrupted existing agreements with consumers and business partners, subjected users to unpredictability and financial loss, undermined trust in its platform, and threatened its status as a CFTC-approved exchange.

The background to this legal battle traces back to March 2025, when Ohio first issued cease-and-desist orders, anticipating the legal challenge that would follow. By that point, Kalshi had already initiated lawsuits against Nevada and New Jersey over similar orders. The timing of Ohio’s August warning to licensed sportsbooks suggests state regulators were trying to close off multiple avenues for prediction markets to gain a foothold in their jurisdiction.

The regulatory situation for prediction markets remains somewhat murky. While Kalshi and other platforms operate under CFTC oversight, their sporting event contracts aren’t yet fully recognized by the federal agency. These markets currently offer such contracts under a “self-certification” provision that allows them to operate until the CFTC conducts a formal assessment. Making matters more complicated, the CFTC itself issued an advisory warning prediction market operators that it hasn’t been asked to officially approve sports-related event contracts, and that platforms should prepare for potential state regulatory actions and litigation.

Understanding the Prediction Markets Boom

The prediction market industry has exploded in recent months, with valuations and trading volumes reaching staggering heights. Kalshi’s valuation more than doubled from $2 billion in June 2025 to $5 billion by October, after raising $300 million from heavyweight investors including Sequoia Capital, Andreessen Horowitz, and Coinbase Ventures. Not to be outdone, rival Polymarket secured $2 billion in funding from the Intercontinental Exchange (the parent company of the New York Stock Exchange), pushing its valuation to $9 billion.

The combined monthly trading volume for Kalshi and Polymarket hit $4.5 billion in recent months, approaching the all-time record of $4.7 billion set during the November 2024 U.S. presidential elections. Kalshi is now projecting it will reach an impressive $50 billion in annual trading volume, a massive jump from around $300 million recorded last year. In September 2025 alone, Kalshi processed $2.74 billion in volume while Polymarket handled $1.44 billion.

The market share battle between the two platforms has been fierce. Kalshi captured over 60% of the global prediction market share by September 2025, a dramatic reversal from December 2024 when Polymarket controlled 95% of the market. Kalshi’s surge came partly through its partnership with Robinhood, which allowed users to trade directly through the broker’s interface, bringing prediction markets into mainstream financial platforms.

The scale of institutional backing underscores Wall Street’s growing confidence in this sector. Beyond the headline funding rounds, total sector funding surpassed $500 million in 2025, signaling that venture capitalists view prediction markets as data platforms and legitimate financial instruments rather than mere gambling apps. Major players like Paradigm, CapitalG (Google’s investment arm), and Founders Fund have all piled in, betting that prediction markets represent the next frontier of financial innovation.

The Legal Chess Match

The legal landscape surrounding prediction markets has become a patchwork of conflicting court decisions across multiple states. Kalshi has filed federal lawsuits in Nevada, New Jersey, Maryland, Ohio, and faces regulatory action in Massachusetts. The outcomes have varied significantly. U.S. District Judge Andrew Gordon in Nevada initially granted Kalshi a temporary restraining order in April 2025, blocking the state from forcing the company to halt operations. However, in a surprising reversal, the same judge denied a similar request from Crypto.com later in the year, suggesting even federal courts are wrestling with how to handle these cases.

A Maryland federal judge also denied Kalshi’s request for a preliminary injunction, reinforcing the view that states retain authority over gambling regulation within their borders. A New Jersey court, by contrast, approved a temporary injunction in Kalshi’s favor, while Massachusetts Attorney General Andrea Campbell filed a lawsuit alleging Kalshi runs an illegal sports wagering operation without proper licensing. This inconsistent legal picture leaves operators, investors, and regulators uncertain about what rules actually apply.

The CFTC itself has sent mixed signals. While it regulates prediction markets as designated contract markets, the commission issued an advisory in 2025 making clear it hasn’t officially approved sports-related event contracts. The CFTC even intervened to request that Robinhood withdraw access to Super Bowl contracts, citing concerns about turning federally regulated markets into gambling platforms. This regulatory pushback from their own federal overseer undermines prediction markets’ central argument that CFTC jurisdiction preempts state laws.

The core legal debate centers on whether these event contracts function as legitimate financial derivatives serving an economic purpose, or whether they’re essentially sports bets dressed up in financial terminology. Nevada’s George Assad captured the skepticism many regulators feel, arguing that calling something a “derivative contract” or a “credit default swap” doesn’t change its fundamental nature as a wager. States insist that the Commodity Exchange Act doesn’t preempt their traditional authority to regulate gambling within their borders.

What’s Really at Stake

The financial implications of this regulatory battle are enormous. Nevada’s sports betting industry alone processed $7.8 billion in wagers during 2024, all under strict state regulation and taxation. State regulators and industry groups warn that allowing prediction markets to operate without licenses or tax obligations could cause “seismic” disruption to established gaming economies.

The Nevada Resort Association, representing 70 casino resorts across the state, filed a motion to intervene in the Kalshi lawsuit, arguing that unregulated prediction markets fundamentally undermine licensed sportsbooks. The association pointed out that Kalshi users in Nevada can currently place $100 on the Las Vegas Golden Knights to win a playoff game and receive the same payout as from a regulated sportsbook, but the state collects zero tax revenue from that transaction. This isn’t just a Nevada problem either. Bank of America analysts have labeled sports contracts offered by Kalshi and Polymarket as “untaxed gambling,” highlighting concerns that span the entire regulated gaming industry.

The rise of these currently unregulated but highly profitable markets parallel the ascent of another market segment which has experienced a substantial rise, the crypto-based betting platforms.

Consumer protection represents another major concern. State-regulated sportsbooks must comply with age restrictions (typically 21 and older), responsible gambling programs, self-exclusion systems, and rigorous oversight designed to prevent problem gambling. Prediction markets regulated by the CFTC may allow 18-year-olds to trade, implement different consumer safeguards, and operate under a regulatory framework designed for financial markets, not gambling. Nevada’s George Assad specifically mentioned protecting 18- and 19-year-olds from gambling harm as a key reason to block these products.

The impact on tribal gaming adds another dimension. Assad noted that platforms like Kalshi want to “impose their will on sovereign nations like the Indian tribes,” which have their own gaming compacts and regulatory agreements with states. Allowing federally-regulated prediction markets to bypass these arrangements could undermine decades of carefully negotiated tribal gaming frameworks.

The stock market has already felt the tremors. DraftKings stock fell 20% and Flutter Entertainment (FanDuel’s parent company) dropped 9% over a recent month as Kalshi’s expansion threatened their market position. When Kalshi announced its $300 million funding round at a $5 billion valuation and expansion to over 140 countries, both DraftKings and Flutter saw their share prices decline further. Morgan Stanley advised investors to “buy into the weakness,” arguing the market had overreacted, but the fear among traditional sportsbook operators is palpable.

The Industry Response

Traditional sports betting giants have responded to the prediction market threat with a mix of skepticism, exploration, and outright rejection. DraftKings CEO Jason Robins delivered a hard no when asked about entering the prediction market space. Speaking at the Global Gaming Expo in Las Vegas, Robins argued that it is more profitable focus on the specific niche represented by sportsbooks:

The product of the sportsbook and what it’s able to do is so much stronger than the product of a prediction market.

He expressed confidence that in states offering both options, customers would recognize sportsbooks as providing “a vastly stronger experience.”

FanDuel took a different approach. The Flutter-owned company partnered with the Chicago Mercantile Exchange to launch FanDuel Markets, planned for the end of 2025. The platform will operate at a federally regulated level covering financial, leisure, and entertainment outcomes, but notably steers clear of sports for now until regulatory clarity emerges. This cautious strategy acknowledges both the opportunity and the regulatory minefield prediction markets represent.

BetMGM aligned itself firmly with state regulators. CEO Adam Greenblatt stated clearly during the company’s third-quarter earnings update that “our position is clear and aligned with almost 40 state attorneys general, our regulators and our tribal partners.” Greenblatt characterized sports prediction markets as “in essence, illegal sports betting” under current law. Caesars has taken a wait-and-see approach. President of Caesars Sports and Online Gaming Eric Hession said the company is “actively watching the situation” to avoid being “caught flat footed,” but noted that nothing has moved through the court system definitively yet.

The regulatory warnings from states like Michigan, Ohio, and Arizona have had a chilling effect on operators considering prediction market partnerships. When Michigan warned that even partnerships with entities offering sports event contracts outside the state could trigger licensing reviews, it effectively erected barriers that extend far beyond state borders. These warnings forced companies to weigh whether potential prediction market revenue justifies risking their valuable state gambling licenses, which generate billions in established revenue streams.