Prediction market operator Kalshi accused Nevada's gaming regulator on Saturday of violating federal law after the state agency sought daily penalties of $120,000 against the company. The dispute centers on whether Kalshi complied with a court order to implement geofencing, a technology that uses GPS or cellular data to create a virtual geographic boundary to restrict service in specific areas.
The legal conflict follows a preliminary injunction issued by a Nevada judge in April. The order barred Kalshi from offering prediction contracts in the state unless it obtained a formal gaming license. Nevada regulators recently filed a court document alleging that Kalshi failed to meet a court-ordered deadline to have a complete geofencing solution active.
According to a court filing seen by Reuters, board investigators successfully placed nine trades on Kalshi's mobile application while connected to cellular networks within Nevada. These trades occurred one day after the deadline for compliance. In response, Kalshi stated it had hired GeoComply, a vendor licensed by Nevada's gaming regulator, at the state's request and maintained communication with officials throughout the process.
Lawyers for Kalshi alleged that Nevada investigators misrepresented their residences to the company, which they stated is a violation of federal law. The company further claimed that at least one investigator took steps to circumvent the company's own internal blocking measures. The Nevada courts did not immediately respond to requests for comment regarding these allegations on Saturday.
For residents of Nevada, the outcome determines whether they can legally access Kalshi’s mobile application to trade on the outcome of future events. Currently, the preliminary injunction means users in the state are barred from these contracts unless the company secures a gaming license. The use of geofencing technology is the primary method by which companies ensure they are not violating state-specific bans; the failure or circumvention of such technology could lead to stricter oversight of how these apps verify a user's physical location.
The case also sets a precedent for how state regulators interact with federally overseen or alternative trading platforms. The knock-on effects may influence how other states enforce geofencing mandates and how third-party location-verification vendors like GeoComply are utilized in legal proceedings. A final decision on the daily fines and the alleged circumvention by investigators has not yet been reached, and a hearing date for the penalties was not reported.