Kalshi Accuses Nevada Regulator of Violating Federal Law in $120,000-a-Day Geofencing Dispute

Kalshi accused Nevada’s gaming regulator on Saturday of violating federal law in the latest turn of a dispute over whether the prediction-market operator satisfied a court-ordered geofencing requirement. The accusation came after the Nevada Gaming Control Board sought penalties of $120,000 per day over what it says was Kalshi’s failure to fully block covered event-contract trading from within the state by an August 12 deadline.

The disagreement is now centered less on what the July agreement required than on whether Kalshi’s implementation met that standard and how state investigators tested the system. A court filing reviewed by Reuters said board investigators successfully placed nine trades through Kalshi’s mobile app while connected to cellular networks in Nevada on August 13, one day after the deadline. Kalshi says it hired GeoComply at Nevada’s request, kept the state informed during implementation and disputes the regulator’s claim that the result justifies the daily penalties.

In its Saturday statement, Kalshi’s lawyers said Nevada investigators misrepresented their residences to the company, which Kalshi characterized as a violation of federal law, and said at least one investigator circumvented the company’s own blocking measures. Reuters reported that Nevada courts did not immediately respond to a request for comment outside normal business hours. The available reporting does not identify a court ruling accepting Kalshi’s latest allegations, so those claims remain contested rather than established findings.

The $120,000-a-day agreement set an August 12 deadline

The penalty figure comes from a joint stipulation between Nevada and Kalshi that was submitted on July 23 and signed by the court the following day. Under the signed stipulation, Kalshi agreed to implement by August 12 a multi-source geofencing solution provided through GeoComply that was designed to prevent people located within Nevada from placing trades that would violate the preliminary injunction.

The same document spells out what happens if implementation is not complete. Kalshi can pay Nevada $120,000 for each day after August 12 until the GeoComply system is implemented, or it can submit a sworn affidavit from a Kalshi or GeoComply representative explaining why the work remains incomplete. If the court then concludes that Kalshi did not act with sufficient diligence, the company may face penalties in an amount determined by the court. That structure matters because the $120,000 figure is tied to the implementation requirement rather than functioning as an automatic fine for every individual trade that gets through.

The July stipulation also records an important concession and an important reservation. Kalshi acknowledged that, despite its earlier IP-based and residency-based trading blocks, Nevada investigators had succeeded in placing sports, election and entertainment-related event-contract trades while the amended preliminary injunction was in effect. At the same time, Kalshi did not concede that those transactions supplied grounds for contempt and expressly reserved its defenses.

The agreement replaced a contempt hearing that had been scheduled for July 29 and required Kalshi to provide Nevada with the same information and implementation updates it was providing to Michigan. It also allowed Nevada, together with Kalshi’s counsel, to discuss the geofencing solution with GeoComply. The regulator said in a July 24 statement that the arrangement was intended to bring Kalshi into compliance after investigators repeatedly accessed contracts the court had barred the company from offering in the state.

Kalshi says Nevada’s tests bypassed the safeguards

Kalshi’s Saturday response attacks the regulator’s evidence from two directions. First, the company says it did what Nevada requested by retaining GeoComply, a vendor licensed by the state regulator, and keeping officials updated. Second, it says the investigators’ own conduct undermines Nevada’s claim that the system simply failed during ordinary use.

According to Reuters, Kalshi’s lawyers said investigators misrepresented their residences when dealing with the platform and that at least one investigator got around a Kalshi blocking measure. The company says that conduct violated federal law, but the Reuters account did not specify the federal provision Kalshi says was breached. Without the underlying Saturday statement or a new court ruling that resolves the allegation, it would go beyond the available evidence to treat Kalshi’s legal claim as settled.

Nevada’s evidence points in the opposite direction. The court filing cited by Reuters says investigators were able to place nine trades on Kalshi’s mobile application while on cellular networks inside Nevada one day after the deadline. For the regulator, successful post-deadline trades are evidence that users physically in the state were still able to reach markets that were supposed to be blocked. For Kalshi, the relevant question is whether those trades reflect an incomplete GeoComply implementation or investigators deliberately defeating safeguards in ways that do not represent normal access.

That distinction is central to the penalty dispute. The July order required a multi-source solution designed to prevent prohibited Nevada trading. It did not say that every successful test trade automatically establishes a $120,000 daily liability regardless of how access was obtained. The court may therefore have to consider the technical facts of the implementation, the methods investigators used and whether Kalshi satisfied the diligence standard built into the stipulation.

The geofencing fight sits inside a broader jurisdiction battle

The Nevada case is part of a much larger conflict over who has authority to regulate prediction markets that offer event contracts tied to sports and other outcomes. Kalshi operates as a federally regulated designated contract market and has argued in litigation that the Commodity Futures Trading Commission has exclusive jurisdiction over its exchange and federally regulated event contracts. Nevada’s gaming regulator takes the view that covered sports, election and entertainment contracts offered within the state are subject to Nevada gaming law and cannot be offered there without the required license.

The CFTC has publicly backed the federal-jurisdiction position. In February, the agency said CFTC-registered exchanges were facing state actions that threatened what it described as the Commission’s sole regulatory jurisdiction over prediction markets. In April, the CFTC sued Arizona, Connecticut and Illinois over state efforts to restrain activity on registered designated contract markets, arguing that Congress created a national framework for commodity derivatives rather than a patchwork of state regulation.

Nevada, however, has already obtained state-court orders restricting Kalshi’s activities. The Gaming Control Board’s official timeline says it filed its state enforcement case in February, obtained a temporary restraining order in March and secured an injunction in April. The board’s July release says an amended preliminary injunction entered on May 18 prohibited Kalshi from offering or facilitating sports, election and entertainment-related event contracts within Nevada. The later geofencing agreement was an enforcement mechanism built on top of that order, not a resolution of the underlying federal-versus-state jurisdiction dispute.

That makes the latest clash narrower than the national argument but potentially important for how state orders are enforced in practice. Nevada is seeking to use the $120,000-per-day mechanism to compel compliance with a location block that Kalshi agreed to implement. Kalshi is responding that it retained the state-requested vendor and that investigators themselves manipulated account information or bypassed controls. The immediate issue is therefore whether the August 12 implementation satisfied the court-approved stipulation and, if not, whether Nevada has shown the basis for the penalties it is seeking.

The July order remains the operative framework for that question. If Kalshi’s implementation was incomplete, the stipulation gives the company the choice of paying $120,000 per day or explaining the delay under oath, with the court able to impose penalties if it finds a lack of sufficient diligence. Kalshi’s Saturday statement signals that it intends to contest Nevada’s characterization of the post-deadline trades rather than accept that those transactions, by themselves, prove noncompliance.