Nevada Gaming Control Board Issues Guidance Concerning Sports Event Contracts

In the midst of its ongoing litigation with three leading prediction market companies, also known as “designated contract markets” or “DCMs,” the Nevada Gaming Control Board (“NGCB” or “Board”) recently issued guidance to Nevada gaming licensees concerning the status of DCMs in Nevada. The guidance was issued in the form of two separate “Notice to Licensees” (“Notice”) memoranda from the NGCB chairman, wherein the NGCB sought to generally clarify its position on the legal status of DCMs in Nevada and warn Nevada gaming licensees of the regulatory risks posed by associating with such companies. This client alert summarizes this guidance and its importance for Nevada gaming licensees.

Background

DCMs offer binary contracts, structured as financial derivatives, which allow customers to speculate on whether a particular event will occur, such as the outcome of a forecasted weather event, a congressional election or a sports event. Although DCMs must be registered with the federal Commodity Futures Trading Commission (“CFTC”), which has statutory authority for the regulation and oversight of DCMs, a legal question has emerged as to whether this federal regulatory scheme effectively preempts state gaming regulators from exercising parallel regulatory authority over DCMs. At a very minimum, at least over their activities that resemble traditional sports betting.

Last spring, gaming regulators in several states, including Nevada, ordered DCMs to cease offering sports events contracts within their respective jurisdictions on the grounds that it constitutes unlicensed and, therefore, unlawful sports betting. These cease and desist efforts were met with the filing of lawsuits against the state regulators by at least three DCMs that have sought to legally enjoin the states from undertaking any enforcement action vis-à-vis their business activities. This litigation is now ongoing in several federal courts, both at the trial and appellate levels and the results, so far, have been mixed. Some judges have preliminarily agreed with the DCMs’ argument that states are preempted from exercising jurisdiction and at least one judge preliminarily reached the opposite conclusion. Further clouding the legal picture is the fact that, in Nevada, the same judge has reached seemingly contradictory conclusions on the preemption issue in two different cases involving two different DCMs. With appeals now pending in two separate federal circuits, it will likely take some time before final clarity on the legality of this new business model is achieved.

The Nevada Litigation

Nevada’s gaming regulators were the first to issue a cease and desist demand to specific DCMs and were the first to be sued. So far, three separate suits have been filed by DCMs against the Nevada regulators seeking to enjoin them from taking any enforcement action. In the first case, a DCM known as KalshiEX LLC (“Kalshi”) obtained a preliminary injunction (“PI”) from a U.S. District Court judge for the District of Nevada in Las Vegas, effectively precluding the state from taking any further enforcement action. The Nevada regulators chose not to immediately appeal that decision and the case remains pending in the U.S. District Court. In the second case, another DCM, North American Derivatives Exchange, Inc., dba Cyrpto.com (“Crypto.com”) followed Kalshi’s lead and similarly sued and sought a PI to stop an enforcement action. However, the same judge who issued the PI to Kalshi declined to do the same for Crypto.com. This interesting development predictably led the Nevada regulators to request that the judge dissolve the PI he previously issued in favor of Kalshi. A hearing on that issue is scheduled for Nov. 14. In addition, a third company, Robinhood Derivatives, LLC (“Robinhood”), has filed a similar lawsuit and is also seeking a PI to prevent enforcement action by the Nevada regulators. Robinhood, while not a DCM, is a futures commission merchant or “FCM,” and is aligned with Kalshi and Crypto.com on the federal preemption issue. Its request for a PI also remains pending with the same judge assigned to the Kalshi and Crypto.com cases.

The New NGCB Guidance

The first Notice guidance was issued on Oct. 15, 2025, by NGCB Chair Mike Dreitzer. This Notice first acknowledges that Nevada licensees or affiliated companies have expressed interest in offering sports events contracts and the NGCB has received inquiries about its position on such activities. The Notice then offers the NGCB’s position on this issue, explaining that it “considers offering sports event contracts, or certain other events contracts, as constituting wagering activity under Nevada Revised Statutes (NRS) 463.0193 and 463.01962.” Moreover, the Notice confirms that in the opinion of the NGCB, “[w]agering occurs whether the contract is listed on an exchange regulated by the Commodity Futures Trading Commission (CFTC) or elsewhere.” The Notice goes on to state: “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 ….” (emphasis in original). Therefore, to the extent there was any ambiguity about the NGCB’s position previously, the Oct. 15 NGCB Notice effectively removed it.

The Oct. 15 Notice also emphasized that if a Nevada licensee “chooses to offer Sports and Other Events in Nevada or decides to partner with other entities offering Sports and Other Events Contracts in the state, the Board will consider these developments as it evaluates the suitability of the entity to maintain a Nevada gaming license under NRS 463.170.” The Notice further warned that “[en]gaging 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 in question the good character and integrity of the licensee.” Thus, Nevada gaming licensees are effectively on notice to tread carefully in the event contracts space.

In the second Notice, dated Oct. 24, 2025, the NGCB provided an update on the Crypto.com litigation, confirming that the matter was on appeal and, pending appeal, Crypto.com would not be offering sports events contracts in Nevada. In addition, this second Notice reaffirmed the NGCB’s position as articulated in the Oct. 15 Notice, i.e., offering sports event contracts constitutes wagering activity under Nevada law whether or not the activity is regulated by the CFTC, and such offerings may be conducted in Nevada only if the offering entity possesses a nonrestricted gaming license with sports pool approval in Nevada. This second Notice also reaffirmed that a Nevada licensee’s associations with other entities offering sports events contracts and a Nevada’s licensee’s event contracts-related activities in other states will be considered by the NGCB when evaluating a licensee’s suitability to maintain a license in Nevada.

The Future for DCMs in Nevada

The NGCB has, over the past several months, consistently made its position on DCMs clear, as evidenced from its cease and desist letters last spring, through its position in the ongoing litigation and including its recent Notice guidance. Moreover, as noted above, the NGCB is clearly concerned about Nevada licensees’ associations with those entities it deems to be on the wrong side of the legal issues presented by this new business model. For his part, Nevada’s attorney general has also made his position clear. Not only is his office defending NGCB’s position in the Nevada regulators’ litigation described above, he has also been out front on the issue nationally and is leading, along with Ohio’s attorney general, a coalition of gaming states that have filed an amicus brief in support of New Jersey’s regulators in their appeal of a PI issued by a federal district judge there in favor of Kalshi’s position.

As for next steps, despite the initial setback in court with the issuance of a PI in favor of Kalshi, the denial of Cyrpto.com’s PI request provides a pretty clear signal that the judge presiding over the Nevada suits hasn’t finally decided the preemption issue, despite having initially found that Kalshi was likely to prevail on that very issue. In any event, with Crypto.com already having announced that it would appeal the denial of its PI request, and Kalshi or the Nevada regulators likely to do the same depending on the outcome of that case, final clarity in Nevada will take some time. Similarly, given the pending appeals of district court decisions in both New Jersey and Maryland, nationwide, clarity is likely many months away. And, of course, with the possibility, indeed probability, of a split between two or more federal circuit courts of appeal on the preemption issue, the question of whether the states can or cannot regulate DCMs could well end up on the docket of the Supreme Court of the United States. In fact, at least one DCM is actually taking bets on whether the Supreme Court will accept one of these cases for review by July 2026. If that happens, we can count on many more months of litigation before final regulatory certainty is realized. Naturally, of course, Congress could weigh in at any time with its own version of clarity on the preemption issue, but that seems extremely unlikely in the near term.

Conclusion

Despite the uncertainty surrounding Nevada’s ability to regulate DCMs, Nevada licensees are well advised to understand that both Nevada’s regulators and chief law enforcement officer have made their position very clear: (1) offering events contracts on sports in Nevada requires a nonrestricted Nevada license to operate a sports pool and doing so without such a license could result in criminal charges; and (2) Nevada licensees’ activities in this area, even outside of Nevada, and including partnerships or other affiliations with DCMs may be relevant to their suitability as Nevada licensees. Accordingly, caution should be the guiding principle for Nevada licensees going forward as final clarity on these important legal issues remains in flux.

Brownstein’s gaming team is following these developments very closely. Please contact the authors with any questions.

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This document is intended to provide you with general information regarding NGCB guidance on sports event contracts. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.