Adam Roarty is a journalist covering sports betting, regulation, and industry innovation for CasinoBeats. His coverage includes tax increases in the UK, covering breaking stories in the ever-evolving landscape of US betting such as the...
Read Full BioA judge in Nevada has denied Crypto.com’s request for a preliminary injunction in its lawsuit against the Nevada Gaming Control Board.
The same judge had previously granted Kalshi’s request for the same injunction in its case with the state’s gambling regulator in April. The refusal to do the same for Crypto.com could mark a turning point for sports event contracts, which have been expanding at a rapid rate.
U.S. District Court Judge Andrew Gordon granted Kalshi an injunction, based on the argument that its sports markets likely fall under the swaps category of the Commodity Exchange Act (CEA).
The CEA is essentially the rulebook for markets offered by trading companies with licenses from the Commodity Futures Trading Commission (CFTC). The CFTC licenses both Kalshi and Crypto.com.
In the Kalshi ruling, Gordon wrote, “Section 2’s plain and unambiguous language grants the CFTC exclusive jurisdiction over accounts, agreements, and transactions involving swaps or contracts of sale of a commodity for future delivery that are traded or executed on exchanges that the CFTC has designated”.
Despite the adverse ruling, Crypto.com told CasinoBeats the company remains convinced its markets count as swaps under the CEA. A spokesperson commented, “When two cases on the same issues before the same judge result in two completely different rulings, it guarantees a different result at the appellate level.
“We remain steadfast that the contract we offer are swaps subject to the exclusive jurisdiction of the CFTC and we look forward to the next round following our appeal.”
Crypto.com Ruling Could Have Wide Implications
The written explanation for Gordon’s ruling in the Crypto.com case is not yet available. Gaming lawyer Daniel Wallach posted on X, “Since it was a motion for preliminary injunction, the finding probably was that Crypto.com was unable to demonstrate a likelihood of success on the merits, with the court focusing on whether the contracts qualify as swaps.”
In a subsequent post, Wallach wrote, “If sports event contracts do not qualify as ‘swaps’ under the CEA, then the entire business model falls apart. Kalshi’s federal preemption argument is premised on these contracts being treated as swaps. Lose that designation, and the preemption argument is stopped in its tracks.”
Kalshi also won an injunction in its case in New Jersey, similarly arguing that its contracts are governed at the federal level by the CFTC. However, it was denied an injunction in its case in Maryland. In that case, Judge Adam Abelson ruled Kalshi had failed to show the CEA preempts Maryland’s gaming laws.
What Happens Now?
If judges definitively rule that the markets do not fall under the swaps category, then it may force companies to either remove the markets or apply for state gambling licenses.
The CFTC had remained fairly silent on sports prediction markets until now, but this week it warned operators that they may face litigation and will require contingency plans. The suggestion is that companies may be forced to geoblock users from certain states.
Sportsbooks must already comply with this requirement, as each state has its own unique gambling regulations. Prediction market platforms claim they offer legal sports betting in all 50 states, but of course, states have not approved this.
The adverse ruling for Crypto.com comes at a time when it seemed that prediction markets were poised to dominate sports betting. In response to Kalshi launching same-game parlays on the NFL this week, DraftKings and Flutter’s stock prices plummeted.
Those fears may have been premature. However, stock prices have not reacted to the ruling. DraftKings’ price fell to below $35 on Friday, from over $42 on Monday. Similarly, Flutter, the group behind FanDuel, saw its price drop by over 10% in the last five days.
Investment banks remain divided on the impact of prediction markets on sportsbooks. The ruling in Nevada is still a long way from bringing clarity to the legal status of prediction markets, but it does mark a shift in how courts are treating companies that operate in this space.
