The Nevada Gaming Control Board has set a deadline for Kalshi, a prediction market operator, to implement a geofencing solution by August 12. This agreement aims to prevent individuals in Nevada from participating in trading contracts related to elections, entertainment, or sports events.
As disclosed by the Nevada Gaming Control Board late Friday, failure to comply by the specified date will incur a hefty fine of $120,000 per day. Kalshi has engaged GeoComply to develop the necessary geolocation software and has committed to keeping the state regulator informed about the project's progress.
NGCB Chair Mike Dreitzer emphasized the importance of this agreement, stating, “This will ensure that Kalshi adheres to Nevada law moving forward, or face significant penalties.” The board remains dedicated to enforcing state regulations to protect the integrity of gaming in Nevada.
This arrangement follows a preliminary injunction issued against Kalshi by a state judge over two months ago. The NGCB had filed a lawsuit claiming that Kalshi’s contracts were equivalent to gambling and that the operator lacked a state license.
Initially, Kalshi attempted to implement an in-house solution to restrict access, but reports indicated that some Nevada residents were still able to access the markets. The NGCB noted that their investigators had successfully placed trades in contracts that were supposed to be unavailable.
Due to these issues, the board sought to hold Kalshi in contempt of the injunction, with a hearing scheduled for Wednesday. However, both Kalshi and the NGCB requested to cancel this hearing in their recent court filing.
The geofencing solution is expected to remain active throughout the injunction period. Kalshi’s previous in-house solution relied on users' IP addresses and reportedly cost under $200,000 to develop, using friends and family for testing.
In their joint stipulation, Kalshi acknowledged that despite its efforts, state investigators managed to execute trades in contracts related to sports, elections, and entertainment during the injunction. However, Kalshi maintains that these trades do not constitute grounds for contempt, reserving all rights and defenses.
Kalshi has not yet responded to requests for comments regarding this matter.
Additionally, Kalshi faces similar legal challenges in Michigan, where a judge recently issued a temporary restraining order against the operator for offering sports contracts. The Michigan court also mandated the use of a third-party solution to prevent local traders from accessing these contracts.
The Michigan injunction has also been extended until August 12, with a potential daily fine of $500,000 for non-compliance. However, U.S. Commodity Futures Trading Commission Chairman Michael Selig has urged Kalshi to disregard the state court ruling, complicating the situation further.
This issue was discussed during a recent House Agriculture Subcommittee hearing, where U.S. Rep. Kristen McDonald Rivet raised concerns about the potential civil penalties Kalshi could face regardless of its compliance efforts.