Nevada challenges Kalshi’s preemption argument over North Carolina tax
Nevada argues that Kalshi’s reliance on North Carolina’s prediction market tax undermines its claim that states lack authority over federally regulated event contracts.
US.- Nevada has turned Kalshi’s own arguments against it in a legal case over its operations in the state. In a filing to the Ninth Circuit, the state said Kalshi’s reliance on North Carolina Senate Bill 257 on the taxation of prediction markets contradicts its arguments that federal law preempts state authority over its operations.
The North Carolina law imposes a 6 per cent tax on prediction market operators’ net trading fee revenue attributable to transactions conducted in the state. It does not establish a state licensing system but allows CFTC-registered prediction markets to operate if they comply with the Commodity Exchange Act (CEA).
Kalshi cited the law in an August 11 letter to argue that states retain certain powers over prediction markets despite the CFTC’s exclusive federal authority over trading on designated contract markets (DCMs). The operator also argued that states can impose lawful taxes on revenue generated through DCM trading.
Nevada rejected that distinction, arguing that taxation is itself a form of state regulation. “Both are forms of regulation by the State,” the state told the court, calling Kalshi’s position a “stunning about-face” effectively acknowledging that states can regulate aspects of its operations. As such, the state argued that Kalshi should not be able to avoid Nevada’s own taxing provisions.
