A federal judge in Nevada has signalled that he may reverse an earlier ruling that protected prediction markets operator Kalshi from state gambling enforcement, adding fresh uncertainty to a legal battle unfolding across the United States.

Reportedly, US District Judge Andrew Gordon said during a hearing last Friday that he is now ‘leaning toward dissolving’ the preliminary injunction he issued in April 2025, which had temporarily blocked Nevada regulators from acting against the company. He told both sides he would issue a written decision within two weeks, raising questions over whether the platform will retain federal protection in the state.

The case has become a major flashpoint in a broader national debate over how prediction markets should be regulated. At the centre of the dispute is whether Kalshi’s event-based contracts, which allow users to trade on outcomes ranging from sports matches to political events, fall under federal derivatives law or state gambling rules.

Kalshi pressed over market concerns 

Despite the popularity of these prediction platforms in the US, Judge Gordon pressed Kalshi’s lawyers on whether their sports-related products legally qualify as derivatives, noting that the firm’s interpretation of what constitutes a “swap” appeared unusually broad. “It seems like your definition is so broad that pretty much anything can become a swap,” he said, adding that, historically, sports wagers have never been treated as commodities or financial instruments.

For the unaware, Kalshi sued Nevada’s regulators in March 2025 after the state issued a cease-and-desist letter alleging that the company was offering unlicensed gambling. Nevada maintains that Kalshi’s contracts are wagers dressed up as financial products, and therefore fall squarely under state gambling authority.

Kalshi counters that its contracts are “options” regulated by the Commodity Futures Trading Commission (CFTC), arguing that federal derivatives law pre-empts state gambling rules. The firm says its nationwide exchange operates under full CFTC supervision. Following the latest hearing, a Kalshi spokesperson said the company “respects the court’s direction” and will continue discussions with Nevada regulators while operating “in compliance with federal law”.

Looming trouble in multiple states

The Nevada case forms only one part of a much wider legal confrontation. Courts in more than a dozen states are weighing similar questions about how state gambling laws apply to event-based trading platforms. In California last week, a judge rejected a motion from three tribal groups seeking to restrict Kalshi’s operations on tribal lands, pointing to both CFTC authority and the Unlawful Internet Gambling Enforcement Act. New Jersey has also granted Kalshi a favourable injunction blocking enforcement actions there.

Maryland, however, denied the company’s request for similar protections, underscoring the legal divide among states. Additional cases are active in New York, Massachusetts and Ohio, where state regulators argue that prediction markets closely resemble traditional gambling. Twenty-two Native American tribes, including the Seminole Tribe of Florida, have filed a brief backing Ohio’s position.

Massachusetts’ Suffolk County Superior Court is scheduled to hear the state’s injunction motion against Kalshi on 9 December 2025. Meanwhile, several states, including Arizona, Illinois and Montana, have issued cease-and-desist orders. Nevada regulators have also warned licenced sportsbooks that offering event-style contracts could risk their licencing status.

In response, DraftKings and FanDuel surrendered their Nevada betting licences last week. Despite legal wins, Kalshi’s future is uncertain as courts debate whether event prediction is financial innovation or just gambling. Meanwhile, traditional online gaming platforms also remain critical of prediction markets. 

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