A federal judge has sent Nevada’s enforcement action against Kalshi back to state court, rejecting the company’s arguments for federal jurisdiction. The ruling allows gaming regulators to seek an injunction against Kalshi.
In a March 2 order, U.S. District Judge Miranda M. Du granted the Nevada Gaming Control Board’s (NGCB) motion to remand, finding that the case arises under state law and that the federal court “lacks subject matter jurisdiction.”
The ruling sends the case back to Nevada’s First Judicial District Court in Carson City, where the state alleges the prediction market platform is operating without a Nevada gaming license, which “harms the State and the public every day.”
Background: Nevada’s Enforcement Action
The dispute began in March 2025, when the NGCB sent Kalshi a cease-and-desist letter stating that it could not accept wagers from persons in Nevada without a gaming license.
Kalshi did not comply. It instead filed suit in federal court seeking a preliminary injunction to block enforcement. Chief Judge Andrew Gordon initially granted and later dissolved that injunction, finding that the Board showed that Kalshi was unlikely to succeed on the merits.
Kalshi appealed this decision to the Ninth Circuit, arguing that the lower court erred in lifting the injunction. It then asked the district court to stay the entire case pending appeal — a request Judge Gordon only partially granted.
With no injunction in place, the Board filed a civil enforcement action in state court on February 17.
Kalshi immediately removed the case to federal court. Judge Du’s order addresses whether that removal was proper.
Federal Question Jurisdiction: No “Substantial Federal Issue”
Kalshi argued the case belongs in federal court because it involved federal law, the Commodity Exchange Act (CEA), which governs CFTC-regulated platforms like Kalshi.
Judge Du disagreed.
She ruled that Nevada’s lawsuit is based on state, not federal, law. The court found that the NGCB claims are based on Kalshi’s failure to obtain a Nevada gaming license, not on whether it holds federal authorization.
Because the claims arose under Nevada law, the court held that federal jurisdiction was improper.
Complete Preemption: CEA Does Not “Completely Displace” State Law
Kalshi also argued that the CEA completely preempts state regulation of trading on CFTC-designated contract markets, giving federal courts exclusive jurisdiction.
The court rejected that theory as well.
Judge Du explained that for federal law to “completely preempt” state law, Congress must clearly show that it intended to replace state claims with an exclusive federal system. Courts treat that as a “rare occasion.”
Judge Du found no such clear intent in the CEA.
She pointed to language in a CEA provision — often called a “savings clause” — that says nothing in that section limits the jurisdiction of federal or state courts. In plain terms, Congress did not say that state authority disappears just because the CFTC regulates certain markets.
Because the CEA does not completely displace state gaming laws, the judge ruled that this argument does not justify keeping the case in federal court.
Federal Officer Removal: CFTC Not a Necessary Party
Kalshi also argued that the suit failed to name the CFTC, which it says is a necessary party. If the CFTC had been included as a party, the case could qualify for “federal officer removal,” a doctrine that allows cases involving federal agencies or officials to be heard in a federal court.
Judge Du again sided with Nevada.
The court found that the CFTC is not a necessary party. That’s because NGCB’s lawsuit is aimed only at Kalshi under state laws. It does not target the agency, so the CFTC faces no legal exposure.
Accordingly, the court rejected federal officer removal as a jurisdictional hook. So once again, the judge concluded there was no valid reason to move the case out of state court.
What This Means for Kalshi
The immediate impact is procedural but significant: Nevada’s enforcement case will now proceed in state court. That matters.
Should the state court grant Nevada a temporary restraining order, Kalshi could be forced to geofence the state. It would follow other prediction market platforms, such as Polymarket, Robinhood, and Crypto.com, which have done so.
That could be significant because it may weaken Kalshi’s argument in other jurisdictions that implementing geolocation technology would constitute “irreparable harm,” a key claim in its ongoing preemption litigation.
Judge Du’s ruling does not resolve whether the CEA ultimately preempts Nevada’s application of its gaming laws.
However, it aligns with previous rulings in Nevada, Maryland, and Massachusetts, which have declined to displace state regulatory authority. Meanwhile, a federal judge in Tennessee ruled that federal law likely preempts Tennessee’s sports wagering regulatory scheme, underscoring the growing split among courts.
Legal commentator Daniel Wallach noted on X that the remand narrows Kalshi’s immediate procedural options. He suggested the company could file an emergency application with the Supreme Court of the United States or seek an expedited stay from the Ninth Circuit. However, he indicated the latter would be unlikely. Otherwise, Kalshi could face pressure to exit Nevada as soon as next week.
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