Nevada Gaming Control Board Issues Another Warning About Sports Event Contracts

Nevada Gaming Control Board Issues Another Warning About Sports Event Contracts

The Nevada Gaming Control Board (NGCB) is reminding its licensees once more of its belief that internet exchanges that facilitate contracts for sporting events are involved in unlawful sports betting, following a significant court verdict.

US District Judge Andrew Gordon backed with the NGCB last week when he declared that businesses like Kalshi, Robinhood, and Crypto.com that offer shares on sports event outcomes are engaging in illegal gambling. According to the corporations, their contracts—including those pertaining to sports—are subject to Commodity Futures Trading Commission regulation since they are financial instruments under federal law.

The NGCB and Gordon don't agree.  The NGCB, which is regarded as the gold standard of gaming regulation, sent another notice to its casinos, sportsbooks, and gaming licensees after the historic decision, stating that they are not permitted to do business with exchanges that continue to offer contracts for sporting events in Nevada without a state-issued license.

Notice to Licensees

According to the NGCB, Kalshi has not stopped operating sports event contracts in Nevada, although Robinhood and Crypto.com have.  The NGCB said it would "vigorously oppose" Kalshi's appeal of Gordon's ruling.

Regardless of whether the wagering takes place on a CFTC-regulated exchange, the NGCB views a sports event contract as a betting transaction.

“Examples of event contracts that the Board specifically considers to be wagering subject to its jurisdiction include event contracts based on the outcome or partial outcome of any sporting or athletic event, or other selected events such as the World Series of Poker, the Oscars, Esports, and political elections (Sports and Other Event Contracts),” the NGCB notice explained. “Offerings for Sports and Other Events Contracts may be conducted in Nevada only if the offering entity possesses a nonrestricted gaming license with sports pool approval in Nevada and meets the other requirements for sports wagering, including, without limitation, wagering accounts and sports book systems.”

The Board "will consider these developments as it evaluates the suitability of the entity to maintain a Nevada gaming license," the NGCB cautions Nevada licensees without sports pool privileges who decide to offer contracts for sporting events or collaborate with a business that does so without the proper license.  "Engaging in unlawful sports wagering in another state or entering into a business relationship with another entity offering unlawful sports wagering in another state may call into question the good character and integrity of the licensee," the warning continued.

Are States Going to Follow?

For CFTC-regulated exchanges that provide contracts for sporting events, Gordon's decision may be the beginning of the end.  Other state gaming regulators may take action against Kalshi and similar companies since the federal court agreed with the state gaming regulator's assessment that sports event contracts are gambling rather than a typical derivative investment.

The NGCB is not the only organization that believes that contracts for sporting events amount to sports betting.  Similar findings have been made by regulators in numerous other states, such as Arizona, Michigan, Ohio, and Pennsylvania.