Nevada sportsbook operators were smiling Thursday evening during much of the opening game of the NBA Finals between the Oklahoma City Thunder and the Indiana Pacers.

The heavily favored Thunder led until the final minutes of the fourth quarter. 

When Pacers’ guard Tyrese Haliburton hit a last-second basket to give the underdog Pacers a 111-110 upset victory, the sportsbooks took a financial hit. The Thunder were a 10-point favorite and many bettors had the Pacers winning outright on the moneyline.

For New York City-based Kalshi, an online financial exchange and prediction market that began offering contracts on sports where customers take a yes or no position on the outcome of a game, the Pacers’ stunning victory wasn’t much of a factor.

Kalshi doesn’t set odds on the games, and customers only invest in the outcome. The exchange takes a 2 percent fee on all contracts, with winning customers paid through the money put up by losing customers.

“[Sports] is a new asset class that never traditionally existed,” said Sara Slane, a longtime sports betting consultant who became Kalshi’s head of corporate development in April. “Commodities trading is institutional, so it's an evolution. We don't win by players losing, and we don't lose by players winning, unlike a sportsbook.”

But not everyone agrees with how Kalshi functions.

The Nevada Gaming Control Board served Kalshi with a cease and desist letter in early March, giving the company 10 days to shut down service in Nevada and saying event-based contracts were unlawful and the company needed to be licensed to operate a sports pool.

Kalshi then sued the regulatory agency. The legal fight is ongoing, and three months later, Nevada customers — including patrons younger than the state’s legal betting age of 21 — can still access the Kalshi trading platform. 

Last week, a federal judge allowed Kalshi’s lawsuit to continue, prohibiting enforcement of the cease and desist order. But the court also allowed the Nevada Resort Association — the gaming industry’s largest trade organization — to join the lawsuit and regulators’ effort to ban Kalshi from the state.

U.S. District Judge Andrew Gordon wrote in his opinion that the Resort Association members would likely “be placed at a considerable competitive disadvantage” if Kalshi did not have to comply with state gaming laws.

How the legal maneuverings play out could have sizable implications on Nevada’s regulated sportsbook industry, which took in $7.8 billion in wagers during 2024 that accounted for $482 million in gaming revenue. That revenue is taxed by the state, while Kalshi’s contracts are not.

Many casino operators in the state, including Boyd Gaming, Red Rock Resorts and MGM Resorts International, have spent millions of dollars to renovate their sportsbooks. Other companies have spent big to improve their mobile sports betting technology.

According to Kalshi, which allows customers to purchase contracts on both desktop computers and mobile devices, more than $21 million was invested on its platform for Thursday’s game. The company has seen more than $240.1 million in NBA contracts this year, which provided Kalshi more than $4.8 million through user fees.

In its legal filing, Resort Association attorneys wrote that “seismic changes” would take place in Nevada if Kalshi and other prediction market operators are allowed to offer futures contracts on sporting events (Nevada gaming regulators filed a similar cease and desist letter last month to Crypto.com for offering event-based wagering contracts). Nevada Gaming Control Board Chair Kirk Hendrick declined to comment for this story, citing the pending litigation.

Las Vegas-based gaming industry consultant Brendan Bussmann agreed with that assessment, saying Kalshi’s contract structure is a way to circumvent regulated gaming.

“If you look at the comments from across the country, this could fundamentally change gaming and revenue to tribal nations and states significantly,” Bussmann said. “Regulators, trade groups, tribal nations, sports leagues, and companies operating legally in the space all agree that this is gaming masked as a predictive outcome.”

Federally regulated

Kalshi is governed federally by the Commodity Exchange Act (CEA) and the Commodity Futures Trading Commission (CFTC), allowing adults in all 50 states to make financial trades on a broad range of topics — from weather to awards shows to U.S. Supreme Court rulings. Because it's a nationwide business, Kalshi can sign up customers from states without legal sports betting, including California and Texas.  

Earlier this year, Kalshi began offering contracts on sports that allow customers to take a position on one side of a game’s outcome without a point spread. That caught the attention of gaming regulators, and the company received cease and desist letters from eight states with regulated sports betting. 

Kalshi has fought back and in legal filings and argues its operation falls exclusively under federal jurisdiction and is not subject to state oversight.

Slane, who played a central role in the nationwide expansion of legal sports betting after the U.S. Supreme Court allowed states to legalize the activity in 2018, said in an interview that the business model is different because “we only charge a financial transaction fee. We’re a financial instrument.”

She said there is room for both traditional sports betting and prediction markets.

“We're not saying that states can't legalize sports betting, and there's a role for sports betting operators on a state-by-state basis,” she said.

In an interview with Axios in April, Kalshi CEO Tarek Mansour said he didn’t believe the company should be treated like a sportsbook.

“I just don't really know what this has to do with gambling," Mansour said. "If we are gambling, then I think you're basically calling the entire financial market gambling.”

Kalshi’s product appears poised to tap into a lucrative market — legal sportsbooks in 39 states and Washington, D.C., took in nearly $150 billion in wagers last year nationwide, which translated into $13.8 billion in gaming revenue, according to the American Gaming Association (AGA). Gaming tax rates vary by state.

In a letter to the CFTC in February, when the organization was planning a roundtable discussion on prediction markets, AGA Senior Vice President of Government Relations Chris Cyle wrote that the sports prediction market “severely undermines state regulatory authority while also jeopardizing state tax revenue. In certain states, the availability of these products also tramples on tribal sovereignty by violating gaming exclusivity agreements with those jurisdictions.”

The roundtable, which had been scheduled for the end of April, was cancelled. No reason was given.

But comments submitted ahead of the planned event drew ire from various professional sports leagues, tribal gaming leaders and lawmakers. 

Rep. Dina Titus (D-Las Vegas), writing as the co-chair of the Congressional Gaming Caucus, said Kalshi directly conflicts with state-regulated gaming and creates a “backdoor way to legalize sports betting in states that have not authorized it.”

Gaming operators are skeptical — for now

During an interview on the VSiN network last week, Circa Sports CEO Derek Stevens said, “Anybody that says [Kalshi] is not gambling is crazy.” 

He added that “the leagues aren't getting their share,” noting that sports leagues have lucrative partnerships with sports betting operators. “The leagues are waiting to have somebody throw a knockout punch here. The knockout punch, in my opinion, is coming.”

During first-quarter earnings conference calls last month, CEOs from the largest sports betting operators said for now, they’re sitting back and watching how the fight between states and Kalshi plays out.

“You want to do it in a way that makes sense,” said DraftKings CEO Jason Robins. “If you’re a California tribe or if you’re a state that hasn’t legalized [sports betting] yet, does it allow you to prosper, or do you want to watch it happen somewhere else?”

Also paying close attention to the outcome of the case is Peter Jackson, CEO of FanDuel parent Flutter Entertainment, which operates Betfair Exchange in the United Kingdom.

“It’s given us good insights on how it could play out,” Jackson said about opportunities for BetFair, which he called the world’s largest betting exchange. “It's worth remembering that [daily fantasy sports] is a really good precursor to the parlay product, whereas the prediction markets are quite limited. We're interested in the potential opportunity.”

In the letter to the CFTC, representatives from Major League Baseball and the NBA were critical of the lack of Kalshi’s integrity measures that are commonly used by traditional sportsbook operators. 

“MLB is not aware of anything that would require exchanges and brokers to notify leagues of potential threats to game integrity, cooperate with league investigations into player, umpire, or employee misconduct, or share data for integrity purposes,” wrote MLB Executive Vice President Bryan Seeley.

Kalshi isn’t folding that easily.

Former Control Board Chairman A.G. Burnett, who authored the October 2015 order that banned the daily fantasy sports websites, said last week the Kalshi matter is very similar. However, Burnett, now a partner with the McDonald Carano law firm, declined further comment because he is representing the Resort Association in the pending litigation.

A CTFC representative did not respond to a request for comment.

Kalshi, which named Donald Trump Jr. as a strategic adviser in January, was founded in 2018 by Mansour and Luana Lopes Lara, who met while studying at the Massachusetts Institute of Technology. 

“They were kind of inspired because there were no ways to hedge or speculate on just events like traditional commodities,” Slane said. “So they went on this six-year journey and got the regulatory process underway.”  

In 2023, Kalshi started the process to legalize — adding politics to the platform and rising to prominence in the runup to the 2024 election after winning a court victory over the CFTC that paved the way for legal election prediction markets in the U.S. 

In addition to the NBA championship, Kashi offers single-game contracts on the NHL’s Stanley Cup Championship and player-versus-player in the French Open tennis tournament. It also offers futures contracts, such as selecting the winner of the 2026 Super Bowl.

Bussmann doesn’t believe the gambling prediction market will stop at sports.

“I’ve got a wheel with 36 numbers on it that alternate between red and black. Can I predict what number comes next and trade it?” he asked of roulette. “This started with a political contest, also illegal in Nevada, and could have wide-ranging effects if they go unchecked in a regulated market.”