What is Nevada arguing against Kalshi in federal court?

Nevada's deputy attorney general argues that because Kalshi accepted a 6% tax on trading revenue under North Carolina's Senate Bill 257, the company is effectively admitting that states have the authority to regulate its operations, which undercuts Kalshi's argument that federal oversight under the CFTC leaves no room for state regulation.

What does North Carolina's new prediction market law actually do?

North Carolina's Senate Bill 257, signed by Governor John Stein, became the first state law to codify CFTC oversight, allowing federally regulated prediction market exchanges to operate legally in the state without a separate state gaming license. It also imposes a 6% tax on trading fee revenue attributable to state residents, effective January 1.

How does North Carolina's prediction market tax compare to sports betting taxes?

North Carolina taxes prediction market operators at 6% of trading fee revenue attributable to state residents, which is considerably lower than the 23% tax on gross wagering revenue that sports-betting operators face in the state.

What is happening with Kalshi in Illinois?

Illinois enacted Senate Bill 3019, effective July 1, which imposes a tiered transaction tax on sports-related exchange wagers placed on prediction markets. The law taxes the first five million wagers at 1.75% and subsequent wagers at 3.5%, and requires operators to obtain a four-year sports-betting license costing $15 million. Kalshi has sued Illinois to overturn the tax.

Nevada Uses North Carolina's Prediction Market Tax Against Kalshi

Nevada Spots an Opening

Legal fights over prediction markets have been grinding through federal courts for months, but Nevada’s attorney general just found what it believes is a telling crack in Kalshi’s armor. In papers filed Thursday with the Ninth Circuit Court of Appeals in San Francisco, Nevada Deputy Attorney General Abigail Pace argued that Kalshi’s acceptance of a new North Carolina trading tax amounts to a direct contradiction of the company’s own legal strategy.

“A stunning about-face, which would mean that (at a minimum) Kalshi cannot evade Nevada’s taxing provisions,” Pace wrote, according to reporting by CDC Gaming. The two-page filing was first flagged publicly by gaming attorney Daniel Wallach on LinkedIn.

The core of Nevada’s argument is straightforward: if Kalshi embraces state authority in one place, it cannot credibly deny that authority everywhere else.

What North Carolina Actually Did

Earlier this year, North Carolina became the first state to codify federal Commodity Futures Trading Commission oversight directly into law through Senate Bill 257, signed by Democratic Governor John Stein. The law lets federally regulated exchanges like Kalshi operate in the state without needing a separate state gaming license or facing an additional regulatory burden. Prediction market operators there will pay a 6% tax on trading fee revenue attributable to state residents, starting January 1.

For context, sports-betting operators in North Carolina face a 23% tax on gross wagering revenue. The prediction market rate is substantially lighter.

Kalshi, by Nevada’s reading, leaned into that framework rather than fighting it. And that, Pace argued, is the problem for Kalshi’s broader legal position.

“By embracing S.B. 257, Kalshi is admitting that a state has the power to regulate its operations in the state,” Pace wrote. She also pushed back on a distinction Kalshi attempted to draw between regulating contracts and taxing revenue from those contracts. “That is purely a formalism,” she wrote. “Both are forms of regulation by the state.”

The Preemption Fight

The legal dispute turns heavily on preemption doctrine. Kalshi has argued that the Commodity Exchange Act creates a regulatory framework so complete that it leaves no room for states to add their own rules, a legal concept called field preemption. Nevada disagrees, and North Carolina’s law gives it fresh ammunition.

“S.B. 257 acts directly in the very field Kalshi claims is preempted,” Pace wrote, referring to Designated Contract Market transactions. On conflict preemption, she similarly noted that the North Carolina law imposes exactly the kind of state-specific regulation that Kalshi said would frustrate federal uniformity.

Kalshi did point out that Senate Bill 257 acknowledges CFTC’s exclusive federal regulatory authority over sports contracts offered by CFTC-regulated markets. Pace was unimpressed. The North Carolina legislature’s “view of the meaning of federal statute is not binding on this court,” she wrote, adding that the legislature’s own actions make clear it “plainly believes there is room for states to act in regulating prediction markets.”

Kalshi did not respond to a request for comment, according to CDC Gaming.

Illinois Adds Another Wrinkle

Nevada is not the only state tangling with Kalshi in court. Illinois entered the picture on July 1, when it began enforcing Senate Bill 3019, a tiered transaction tax on sports-related exchange wagers placed on prediction markets. The first five million exchange wagers are taxed at 1.75%, with subsequent wagers taxed at 3.5%. Operators must also obtain a state sports-betting license, with a four-year license running $15 million. Kalshi has sued Illinois to overturn that law.

The accumulating state-level friction around prediction markets reflects a broader tension that has been building since Kalshi won a significant CFTC-related legal victory and began expanding its offerings. States with established sports-betting frameworks and licensed casinos have strong financial and political incentives to resist a competitor that, under Kalshi’s preferred reading of the law, would operate without paying into state coffers.

Nevada’s Pace is essentially telling the Ninth Circuit that Kalshi’s own business decisions have answered the legal question. Whether the appellate judges see it that way will have significant consequences for how prediction markets are taxed and governed across the country.