Nevada is aggressively pursuing a return to state court for its lawsuit against KalshiEX, LLC, filing an emergency motion with a federal judge this week. The state, through its Gaming Control Board, is challenging Kalshi’s move to shift the legal battle to federal jurisdiction, arguing a fundamental misunderstanding of the law is at play.
At the heart of the dispute lies Kalshi’s operation, which Nevada regulators describe as unlicensed sports betting within state lines. The state’s lawsuit aims to halt this activity, asserting that each day of continued operation inflicts “substantial irreparable harms” on Nevada’s gaming industry and public interest – a claim echoing previous court findings.
This isn’t merely a procedural squabble over paperwork, according to Nevada officials. They maintain that the alleged illegal gambling is actively causing damage, and the state has a clear right to protect its established gaming laws. The state is drawing parallels to a recent case involving Polymarket, reinforcing its position on regulatory authority.
A recent federal appeals court decision cleared a procedural hurdle for Nevada, allowing the state to pursue enforcement under its own laws. However, Kalshi argues federal oversight by the Commodity Futures Trading Commission (CFTC) preempts state authority. Nevada vehemently disagrees, stating federal oversight doesn’t negate its right to regulate gambling within its borders.
Nevada’s legal team is making a critical argument about the threshold for federal jurisdiction. They contend that simply citing a federal statute isn’t enough to justify removing a case from state court. A federal law must not only supersede state law, but also provide an equivalent federal claim allowing the state to seek the same remedy in a federal venue.
The state emphasizes just how rarely this standard is met, pointing out that the Supreme Court has identified only three statutes that meet this stringent criteria. This underscores the exceptional nature of Kalshi’s attempt to move the case to federal court, according to Nevada’s filing.
The court is operating on a swift timeline. Responses to the emergency motion are due in early March, with a statement on the removal and a joint status report to follow shortly after. A ruling in favor of Nevada could see the case swiftly returned to state court, potentially within weeks.
The outcome of this motion will determine where the legal battle over Kalshi’s operations will be fought – a crucial decision with significant implications for the future of online gambling regulation and the balance of power between state and federal authorities.
