I try not to bog you down with the details of all the legal wrangling around prediction markets, because mostly we’re waiting for something big to happen.

We are getting closer to the elusive “something big” in Kalshi vs. Nevada, where there was a series of interesting/important events on Tuesday:

• The US Court of Appeals for the Ninth Circuit denied Kalshi’s motion for an administrative stay in its case against Nevada. (The main motion for a stay is still pending.)

• Nevada initiated civil enforcement action against Kalshi in state court immediately after that in an attempt to get the prediction market to stop serving the state.

• Kalshi removed the case to federal court.

If you’re playing catch-up and/or you are new to the newsletter: This is one of a variety of cases around the country where a prediction market operator has sued a state to stop it from trying to enforce its state gambling laws against said operator.

All of this comes as the Commodity Futures Trading Commission started inserting itself into the legal morass in earnest in the preceding 24 hours. You can read about all of that in yesterday’s newsletter, at The Closing Line, and below. (I felt the need to write about something else as the lead item today.)

On Nevada’s end, here’s a press release about the civil enforcement:

The Nevada Gaming Control Board (Board) filed a civil enforcement action in the District Court for Carson City against Kalshi on Tuesday, Feb. 17. In its complaint, the Board asked the court for a declaration and injunction to stop Kalshi from offering unlicensed wagering in violation of Nevada law.

Kalshi is a financial services company that operates a derivatives exchange and prediction market, which offers products referred to as event contracts for sale. These products are offered for sale on Kalshi’s website and mobile app, and are made available to people in Nevada. The Board considers offering sports event contracts, or certain other event contracts, to constitute wagering activity under NRS 463.0193 and 463.01962 and, therefore, entities offering such event contracts must be licensed.

The Board has deemed Kalshi’s operations to be unlawful in Nevada and in violation of NRS 463.160, NRS 463.350, NRS 465.086, and NRS 465.092.

“The Board continues to vigorously fulfill its obligation to safeguard Nevada residents and gaming patrons, and uphold the integrity of a thriving gaming industry,” said Chairman of the Board Mike Dreitzer.

And here is a letter that Nevada sent to the Ninth Circuit about its actions.

What does all of this mean? As always, listen to Goodwin attorney Andrew Kim and become smarter:

“Nevada appears to have sued Kalshi in state court; Kalshi has already filed a notice of removal for that lawsuit, meaning that there will be a brief pause to sort out which court will hear the enforcement action.

Nevada will likely move quickly to have the Kalshi enforcement action sent back to state court. But while all that’s being sorted out, Kalshi has a bit more time to see if the Ninth Circuit will rule on its request for a stay.

I wouldn’t read too much into the denial of an administrative stay just yet. The Ninth Circuit could have just denied both the motion for a stay and the motion for an administrative stay, if it thought Kalshi was wrong on the merits of a stay. It didn’t do that.

I remain of the view/guess that the merits panel is irritated by the fact that it has to possibly weigh in on the merits before it’s heard argument in the PI appeal. And that the panel is figuring out how to tread carefully, in a way that doesn’t prejudge the appeal itself.

How all this shakes out, I don’t know, but I would urge everyone to be patient. Otherwise, you may end up with self-inflicted judicial whiplash by following signs that aren’t there.

From a legal/jurisdictional standpoint, this is all getting extraordinarily messy.”

So, a lot of rumbling, but we’re still waiting. The lesson is usually not to get too caught up in the minutiae of all these cases. But there was some smoke on Tuesday.

And before the roundup, one more bit of legal news: Kalshi won’t have to geofence Massachusetts. At least not yet.

I am helping Next.io with its new Emerging Verticals event on March 9 in New York City, ahead of the main conference. I’ll be there and speaking! You can get tickets and learn more here. Use code F0EVTCL0L10 for a 10% discount. Reach out if you have any questions about the event or getting tickets.

Prediction markets roundup

• More very loud support of prediction markets from the CFTC: Tuesday was a lot like Monday, but on steroids. After Commodity Futures Trading Commission Chair Michael Selig wrote an op-ed backing the legality of prediction markets in the Wall Street Journal, he doubled down. On Tuesday, he posted a video on Twitter, appeared on Fox Business (see below), and posted this statement on the CFTC website:

  • The Commodity Futures Trading Commission today filed an amicus brief in the U.S. Circuit Court of Appeals for the Ninth Circuit confirming its exclusive jurisdiction over the U.S. commodity derivatives markets, including event contract markets commonly referred to as prediction markets. The brief was filed in North American Derivatives Exchange, Inc. et al v. The State of Nevada on relation of the Nevada Gaming Control Board et al.

    • “CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. This power grab ignores the law and decades of precedent,” said CFTC Chairman Michael S. Selig. “Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit. As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do.”

    • The amicus brief outlines the legal history of the CFTC’s exclusive jurisdiction over all commodity derivatives markets, including prediction markets. Over the years, courts and Congress have established and affirmed the CFTC’s role in regulating these markets. States and other federal entities do not have the authority to further regulate markets within the CFTC’s exclusive jurisdiction, and attempting to do so would have destabilizing economic effects.

    • The CFTC first officially recognized event contracts in 1992 when it allowed the Iowa Electronic Markets, a futures market at the University of Iowa in which traders can buy and sell contracts pegged to events such as presidential elections and corporate earnings. In the wake of the 2008 financial crisis, Congress expressly granted the CFTC comprehensive authority over any such contract based on a commodity, which is broadly defined in statute. The Commodity Exchange Act is designed to account for innovation in the financial markets, allowing for new and emerging use cases within CFTC-regulated markets.

  • Behind all of this was the CFTC filing an amicus brief on the side of Crypto.com in its case against Nevada. You can see that below. While the CFTC getting involved is certainly meaningful, there wasn’t much in the way of fireworks in the filing.

    • More analysis from Kim to The Event Horizon on that amicus: “I think the CFTC did the best it could with the limited amount of time that it had. Much of the brief focuses on repeating or enhancing arguments that the prediction markets have already made. And the sections of the brief that really could have made a difference — explaining how state regulation would interfere with the orderly functioning of markets and the CFTC’s ability to do its job — were more ‘tell, not show.’”

      • “Ultimately, the fact that the CFTC is showing up to these cases at all matters way more than what its briefs actually say. This is a good brief, but just variations on things that we’ve heard before.”

  • Is CFTC vs. states going to get even messier?: “We will see you in court,” was the kicker in the one-minute video Selig posted on Twitter. That message was directed at states that have been trying to rein in prediction markets via cease-and-desist letters and other means. This could presage some Republican-on-Republican altercations on who has jurisdiction.

    • Selig’s backing of prediction markets and challenge to states’ rights brought all sorts of politicians out of the woodwork. Most notably was Utah. Gov. Spencer Cox, in response to Selig:

      • “Mike, I appreciate you attempting this with a straight face, but I don’t remember the CFTC having authority over the “derivative market” of LeBron James rebounds. These prediction markets you are breathlessly defending are gambling—pure and simple. They are destroying the lives of families and countless Americans, especially young men. They have no place in Utah. Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court.”

    • Utah has never had any type of legal gambling; many of us have been waiting for Utah to wake up to the realization that’s no longer the case. Cox directly confronting Selig was covered pretty widely by mainstream press.

    • I do question the wisdom of the CFTC engaging in an all-out PR assault on the states trying to rein in prediction markets rather than just quietly fighting it in court. I guess we’ll see how it all plays out.

    • Here are some other big names in politics that weighed in:

• DraftKings Will Spend $400 Million On Prediction Market In 2026, Analyst Estimates (InGame): “DraftKings will spend $400 million on prediction markets in 2026, a Wall Street analyst estimates, quantifying CEO Jason Robins’ pledge to ‘deploy growth capital’ to attempt to become a winner in the vertical. Joe Stauff, an analyst with Susquehanna International Group, wrote in a Tuesday note to clients that his team estimates prediction market losses will drag down DraftKings’ 2026 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) by $300 million. With the business spending another estimated $100 million on customer acquisition costs that are not included in the EBITDA figure, that means DraftKings will spend $400 million in total during the year, he wrote.”

• Caesars talked prediction markets in Q4 earnings: Here’s Caesars Entertainment CEO Tom Reeg on Tuesday:

  • “Prediction markets, I know everybody’s got prediction markets questions; we’re no smarter than you in terms of what will happen. To me, this is clearly gambling. I think it will take a couple of years to wind its way through the courts, and you’ll have a patchwork of states where they’re not allowed, states where they’re allowed.

    • In the current regulatory environment, you shouldn’t expect us to be participating in prediction markets. Some of our most valuable assets are our gaming licenses in each of the states that we operate, and it’s been made clear to us in a number of states that if we pursue that avenue, some of our bricks-and-mortar licenses could be at risk. You shouldn’t expect us to do that.

    • But notwithstanding, if there becomes clarity that there is a legal path for prediction markets that satisfies regulators on the brick-and-mortar side, we will find a way to participate. But I would tell you, unequivocally, we view this as gambling that should not be regulated. These are not swaps. They’re not miraculously finding the other side of a 5-team parlay at the same time one side comes in, but we’ll let that play out through the courts.

    • Notwithstanding, our handle grew in the fourth quarter, and continues to grow. We’re not seeing any impact that we can see in our regulated markets as we operate today.”

• NASCAR Considers ‘Data Integrity Partnership’ With Prediction Markets Kalshi, Polymarket, Robinhood (Bookies): “We’ve decided for now to not pursue anything in the prediction market space, but what we are talking about with groups like Robinhood and Kalshi and Polymarket, is ‘Is there a way that we can do some sort of data integrity partnership that doesn’t encroach on this state issue?’ That’s where I have to have more conversations with Arizona and North Carolina. Around the fact that we’re not doing a marketing sponsorship. This is more to protect the brand and fold in regulations and integrity and responsible gaming where those things don’t exist,” NASCAR Director of Sports Betting Joseph Solosky told Bookies.com ahead of the Daytona 500 this past weekend.

• An interesting development in liquidity at prediction markets:

• Kalshi and Polymarket Are Eating Sports Gambling | The Trump administration says prediction markets are something different. Do their users agree? (New York Magazine): “By specifically referencing hedging, Selig draws a parallel between what Kalshi and Polymarket allow people to do and, say, how a farmer minimizes the risk of an unpredictable harvest by selling grain-futures contracts. (Worried that a given candidate winning an election might hurt your business? Place a hefty bet on him or her on prediction markets to balance your risk profile — so goes this argument.) In doing so, the CFTC chair sounds an awful lot like prediction-market executives, who prefer to emphasize how their field is more useful to the world than, say, DraftKings.”

• Coinbase Shifts to Stocks, ETFs and Prediction Markets After $667M Q4 Loss (DeFi Rate): “Coinbase has once again shifted its messaging. In July 2025, Coinbase proudly launched the Base App, a one-stop platform the developers referred to as the “everything app.” It was meant to redefine how users interacted online, becoming the single feed where people could post updates, message friends, move money, and launch mini-apps for gaming, sports betting or trading.

  Following the company’s Q4 results published last week, Coinbase is now on the way to becoming the ‘everything exchange,’ merging traditional finance with on-chain crypto, allowing 24/7 trading of stocks, exchange-traded funds (ETFs), prediction markets, and cryptocurrencies from a single interface. … In addition, last week’s earnings season underscored just how much pressure the exchange is under at this moment, marking a net loss of roughly $667 million.”

• Fireplace Raises $1.5M to Build Institutional Trading Infrastructure for Prediction Markets (press release): “Fireplace, a professional trading terminal for prediction markets, announced a $1.5 million pre-seed round to bring institutional trading infrastructure to one of the fastest growing asset classes in history. The round was led by Frachtis, with participation from White Star Capital and several other notable VCs and Angel Investors, including Syndicate rounds on Legion and Echo.

  • Fireplace offers what prediction markets always lacked: a unified terminal that aggregates markets, liquidity, and execution across prediction market venues. Fireplace delivers real-time data, institution-grade execution, advanced charting, wallet, whale, and insider tracking, and discovery. Wallet technology and automations are powered by in-house Enclave Money infrastructure.

  • As prediction markets fragment across platforms and chains, Fireplace is being built to support cross-venue aggregation with smart-order-routing. Rather than forcing traders to manually compare prices and liquidity across venues, Fireplace will intelligently route orders when the same market exists in multiple places.

  • “Prediction markets are one of the most powerful financial primitives, but the user experience hasn’t caught up.” said Sumer Malhotra, Co-Founder and CEO of Fireplace. “Trading feels slow and information-poor, Fireplace fixes that by giving traders the fastest, most intelligent terminal.”

• TV antennas and Super Bowl rehearsals: How prediction market traders seek an edge (NPR): “Ahead of the Super Bowl, 21-year-old Caden Booth of Cincinnati was looking for ‘alpha.’ That’s finance slang for finding a competitive edge. With the rise of prediction markets allowing people to bet on elections, sports, musical performances and live press conferences, traders are becoming increasingly creative to outmaneuver other bettors.”

  • “In Booth’s case, it meant literally going the extra mile. Armed with a stopwatch and a recording device typically used for capturing bird sounds, Booth boarded a flight from Ohio to the San Francisco Bay Area so he could be outside of Levi’s Stadium in Santa Clara, Calif. to time rehearsals of ‘The Star-Spangled Banner.’”

• Two Papers Show Predictions Markets Are Pretty Good At What They Do (InGame): The original pitch was simpler: When people have money on the line, the price is a clean signal of the ‘wisdom of the crowds.’ Not perfect. Not magical. But more honest than surveys, hot takes, or expert consensus. Two academic papers suggest that idea might actually hold up, at least according to the early data. One paper looks at Polymarket’s quarterly earnings markets and finds the bettors on Polymarket did a better job than Wall Street analysts at calling who would beat earnings. The authors of that study, ‘Financial Prediction Markets: A New Measure of Earnings Expectations,’ are Roberto Gómez-Cram, Yunhan Guo, and Howard Kung of London Business School, along with Theis Ingerslev Jensen of Yale University.”