Nevada Tells Ninth Circuit Kalshi’s North Carolina Tax Argument Backfires
Nevada says Kalshi's reliance on a new North Carolina prediction-market tax undercuts its own federal preemption case before the Ninth Circuit.
This article was produced with AI assistance and edited by the ON360 newsroom.
Nevada has told the Ninth Circuit Court of Appeals that Kalshi’s own arguments about a new North Carolina tax law undercut the prediction-market operator’s case for federal preemption, according to Gambling Insider. The filing responds to an Aug. 11 letter in which Kalshi pointed to North Carolina’s Senate Bill 257 as proof that state taxation can coexist with exclusive federal oversight of event contracts.
S.B. 257 imposes a 6% tax on prediction-market operators’ net trading fee revenue from transactions conducted in North Carolina. It sets no state licensing or regulatory framework. Instead it permits markets registered with the Commodity Futures Trading Commission to operate, provided they comply with the Commodity Exchange Act, and it explicitly recognizes the CFTC’s “exclusive federal regulatory authority” over such contracts.
Kalshi’s tax argument turned against it
Kalshi argued the North Carolina law shows the CEA preempts states from regulating trading on designated contract markets while still leaving room for lawful taxation. “The CFTC’s exclusive jurisdiction prevents states from regulating on-DCM trading, but it does not preclude states from imposing lawful taxes on revenues from trading on DCMs,” the operator told the court.
Nevada rejected that distinction outright. The state called Kalshi’s separation of taxation from regulation “purely a formalism,” insisting both are forms of state control over the same activity.
“By embracing S.B. 257, Kalshi is admitting that a State has the power to regulate its operations in the State, a stunning about-face,” Nevada wrote, adding that the logic would mean Kalshi cannot avoid Nevada’s own taxing provisions either. Nevada also dismissed North Carolina’s statement of exclusive CFTC authority, arguing a state legislature’s reading of federal law does not bind the Ninth Circuit.
Consolidated appeal covers Kalshi, Crypto.com and Robinhood
The exchange is part of consolidated appeals before the Ninth Circuit involving Kalshi, Crypto.com and Robinhood over Nevada’s push to apply its gambling laws to sports event contracts. Oral arguments took place in April, with a three-judge panel weighing whether such contracts qualify as swaps under the CEA and whether federal law preempts state gambling rules.
Judge Ryan Nelson pressed the operators’ side hard during those arguments. He described one proposed distinction between sports event contracts and state-regulated sports wagers as “sophistry to the nth degree,” adding, “it’s still the house.” He also said the underlying activity looked “quintessentially what states have been regulating.”
Kalshi remains blocked from offering sports event contracts in Nevada while the appeal is pending. A ruling could shape parallel preemption disputes now playing out in other US states.
Why it matters north of the border
Canada has no equivalent CFTC-versus-states fight, since sports betting and iGaming here run through provincial frameworks such as the AGCO and iGaming Ontario, with no federally licensed prediction-market carve-out. But the US litigation matters to Canadian operators and regulators watching whether event-contract platforms could eventually seek entry to regulated Canadian markets, and how far federal versus state or provincial authority extends over betting-style products.
Ontario’s regulated sportsbooks and casinos already offer deposit limits and self-exclusion tools for players who want them.
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