Crypto.com Files Federal Lawsuit Against Nevada Gaming Regulators

The derivatives division of the cryptocurrency exchange Crypto.com has started a federal lawsuit against Nevada’s gaming regulators. They accuse the state of illegally stopping the company from offering sports-related financial binary event contracts to residents.

North American Derivatives Exchange Inc., which operates as Crypto.com’s derivatives branch, submitted the complaint in U.S. District Court for Nevada against the Nevada Gaming Control Board. This lawsuit marks the latest development in an ongoing dispute between state gaming authorities and federally regulated prediction markets.

Crypto.com Aims To Establish Federal Authority Over State Gaming Regulations

At the heart of the legal battle is the question of whether state gaming laws have the authority to regulate financial instruments overseen by federal regulators. Crypto.com argues that the Commodity Futures Trading Commission (CFTC) has sole jurisdiction over its event-based derivatives contracts under the Commodity Exchange Act.

In its court filing, the company asserted, “NGCB has no authority to regulate, let alone prohibit, derivatives trading offered by a federally regulated designated contract market operating pursuant to federal law.”

Nevada gaming officials previously sent a cease-and-desist letter to Crypto.com. The letter warned of possible criminal and civil penalties if the exchange kept offering sports event contracts to Nevada residents. The state’s position is that these contracts constitute illegal sports wagering under Nevada statutes.

Crypto.com’s legal approach leans heavily on recent victories in federal courts involving the prediction marketplace KalshiEX. In a notable case, a U.S. District Judge stopped Nevada gaming regulators from taking action against Kalshi, the top provider of event-based contracts. The judge ruled that federal law overrules state authority when it comes to CFTC-regulated event contracts.

Crypto.com Seeks Injunction And Federal Override Of State Gaming Laws

There have been similar court rulings in fights with New Jersey’s gaming officials. These rulings show that federal courts usually support platforms regulated by the CFTC instead of state gaming boards.

Stakeholders remain split on whether event contracts are investments or more like binary options—which are banned in Europe—and simple gambling. But Jack Such from Kalshi thinks these contracts could grow into “a trillion-dollar asset class.”

Both Crypto.com and Kalshi have been checked by the CFTC over contracts linked to the Super Bowl. The federal agency looked into whether these products follow the rules, but both companies say their contracts are legal.

Robinhood, which briefly offered similar prediction markets through Kalshi, pulled its March Madness contracts in New Jersey after regulators pushed back but later started offering prediction trading again.

Crypto.com wants a permanent court order to stop Nevada from using gaming laws against its federally regulated derivatives business. They also want a ruling that federal law is stronger than state gaming rules for CFTC-regulated event contracts.