Nevada Challenges Kalshi With NC Prediction Tax

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Tue Aug 25, 2026, 10:00 am ET

Read Time: 4 minutes

Nevada Challenges Kalshi With NC Prediction Tax

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Nevada has introduced a new argument in its legal battle with prediction-market operator Kalshi. The state is pointing to North Carolina's new prediction-market tax before the Ninth Circuit Court of Appeals. Nevada says Kalshi's support for the tax weakens its federal preemption claims.

The dispute centers on whether federal law prevents states from regulating Kalshi's event contracts. Kalshi argues that the Commodity Futures Trading Commission (CFTC) has exclusive authority over its federally registered exchange. 

Meanwhile, Nevada disagrees and argues that Kalshi's stance on North Carolina shows states retain regulatory authority. The dispute could have major consequences for Nevada gambling and prediction markets nationwide.

Nevada Challenges Kalshi's Preemption Argument

Kalshi has argued that federal law prevents states from regulating trading on federally registered designated contract markets. The company recently cited North Carolina's approach to support that argument, saying states can retain certain powers without interfering with federal oversight.

"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," Kalshi told the court.

Nevada has rejected that distinction and argues that taxation remains a form of state regulation. As a result, the state believes Kalshi cannot accept state taxation while rejecting broader state authority. 

Nevada presented that position in a recent filing with the Ninth Circuit, which is considering Kalshi's challenge to Nevada's authority over its sports-related contracts.

What Is North Carolina Senate Bill 257?

North Carolina's Senate Bill 257 is a wide-ranging budget measure that also created a prediction-market tax. The law imposes a 6% tax on prediction-market operators' net trading-fee revenue, including revenue attributable to transactions involving North Carolina customers.

Importantly, the tax takes effect on January 1, 2027. That timeline gives prediction-market operators time to prepare for the financial requirements. The measure does not create a separate state licensing system for federally registered prediction markets. Instead, it recognizes CFTC oversight while imposing the state tax.

That approach makes Senate Bill 257 important to Kalshi's case. The company has used North Carolina's framework to argue that federal and state authority can coexist. The state now says that position undermines Kalshi's broader preemption arguments.

Nevada Calls Kalshi's Position a "Stunning About-Face"

Nevada argues that Kalshi cannot draw a strict line between taxation and regulation. The state says both involve state control over prediction-market activity.

"The law confirms the central holding of the court below – that States have the authority to regulate Appellants' sports-, election-, and entertainment-related event contracts," the state wrote.

Nevada Deputy Attorney General Abigail Pace presented the argument in the state's filing. Pace also highlighted Kalshi's acceptance of North Carolina's tax framework.

"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 told the court.

The statement directly challenges Kalshi's interpretation of federal preemption. Nevada believes Kalshi's position on North Carolina creates a contradiction. 

Kalshi, meanwhile, maintains that lawful taxation does not equal state authority over federally regulated trading. That distinction could become central as the Ninth Circuit weighs both sides' arguments.

Why the Case Matters for US Online Sportsbooks

The legal battle extends beyond prediction markets and could affect the broader sports wagering industry. Traditional US online sportsbooks operate under state gambling frameworks, while prediction-market operators rely on federal derivatives regulation.

A ruling for Nevada could strengthen state authority over sports-related prediction contracts. It could also give regulators greater leverage over markets competing with traditional sportsbooks. 

On the other hand, a Kalshi victory could reinforce federal preemption protections for federally registered exchanges.

That outcome could make it harder for states to apply gambling rules to prediction-market contracts. The dispute also carries implications for election and entertainment contracts, which Nevada specifically referenced in its latest filing.

Ninth Circuit Decision Could Shape Prediction Markets

The Ninth Circuit now faces a broader question about federal and state authority. Nevada says North Carolina's tax demonstrates that states can exercise power over prediction-market operations. 

Kalshi argues that taxation remains permissible when states cannot regulate on-exchange trading. Therefore, the court's treatment of Senate Bill 257 could influence the wider preemption debate. 

For now, Nevada has turned Kalshi's North Carolina argument into a new legal challenge. The Ninth Circuit's eventual decision could help define how prediction markets operate across the United States.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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