Source: Cointelegraph Original: "{title}"

The prediction market platform Kalshi has filed a lawsuit against the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement, as both regulatory bodies issued cease-and-desist orders requiring the company to stop all sports-related contracts within their respective states.

Kalshi's legal team argues that these contracts fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) and therefore cannot be regulated by state-level authorities.

The team also contends that the cease-and-desist orders fail to recognize that Kalshi's event contracts are a bilateral market, functioning as exchange trading rather than a sports betting model controlled by bookmakers. Kalshi co-founder Tarek Mansour stated, "Prediction markets are a key innovation of the 21st century, and like all innovations, they are often misunderstood at first. We are proud to be the pioneers of this technology and are prepared to defend it in court once again."

Additionally, the Nevada Gaming Control Board issued a cease-and-desist order regarding Kalshi's election contracts, while a U.S. judge ruled in September 2024 that these contracts are legal in the United States—allowing them to be freely traded in the country.

Kalshi sues the Nevada Gaming Control Board. Source: Kalshi

CFTC commits to ending regulation through enforcement

On February 4, CFTC Acting Director Caroline Pham issued a notice marking a significant shift in CFTC regulatory policy, announcing the end of regulation through enforcement actions and deciding to focus on combating fraud.

Pham stated, "The CFTC is strengthening its enforcement procedures, focusing on protecting victims of fraud and remaining vigilant against other legal violations."

This major change has been welcomed by industry companies and is seen as a breath of fresh air following a series of regulatory lawsuits and enforcement actions under the Biden administration.

On the same day, regulators also launched an investigation into the Super Bowl event contracts offered by Kalshi and Crypto.com.

The goal of the CFTC investigation is to ensure that these Super Bowl event contracts comply with existing U.S. derivatives laws; ultimately, the CFTC took no action to prohibit these contracts.

Related: APX Lending receives exemption from Canadian Securities Administrators

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