Kalsi hasn’t had a very good week. Arizona’s attorney general filed 20 criminal charges against the online prediction market on Tuesday, accusing it of operating an illegal gambling operation. Now, another southwestern state is making a big move against the company. A Nevada judge has temporarily barred the service from operating in the state as part of an ongoing lawsuit brought by state regulators.
In February, the state of Nevada sued Carsi on behalf of the Gaming Control Board to stop him from operating a betting site. Authorities allege that Kalsi does not have the appropriate gaming licenses to cover the types of gambling activities its users engage in, and that allowing users under 21 to use the service violates state law.
Earlier this month, the state requested a temporary restraining order against Kalsi as part of an ongoing lawsuit. In state court on Friday, Judge Jason D. Woodbury granted the state’s request and scheduled a hearing on the restraining order for early next month, according to court documents.
Woodbury said in his order that Calsi is not licensed under the Nevada Gaming Control Act and is clearly operating a “percentage game,” which the state defines as gambling, given Calsi’s policy of taking commissions from contracts purchased through its system.
Mr. Carsi has argued that his registration with the Commodity Futures Trading Commission puts him within the federal agency’s exclusive regulatory domain and should exempt him from state law, according to court documents. But Woodbury noted that while the question of whether federal law trumps state law is still unresolved, the courts are not leaning in that direction.
When contacted by TechCrunch, Kalsi declined to comment on the development. The judge’s ruling was first reported by Wired. According to Reuters, Nevada had previously persuaded a judge to ban Calci’s competitors such as Coinbase and Polymarket.
The Nevada case involving prediction markets is just one of a growing number of state lawsuits across the country alleging that sites like Calci and Polymarket operate illegally in disregard of state gaming laws.
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Conversely, current federal officials position themselves as protectors of the forecasting industry. Case in point: Following Arizona’s decision to file criminal charges against Carsi earlier this week, CFTC Chairman Mike Selig lashed out at the decision, posting online: “The Arizona Attorney General today filed criminal charges against one of the registered exchanges associated with prediction markets. This is a jurisdictional dispute and completely inappropriate as a criminal prosecution. @CFTC is closely monitoring this and evaluating its options.”
The increasingly hostile attitude of state regulators and the CFTC’s leniency have all but guaranteed a regulatory battle between states and the federal government over prediction markets and their future.
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