tl;dr

A Nevada federal judge denied Crypto.com's bid to block state regulators from overseeing prediction markets, reigniting debates over federal vs. state authority in crypto regulation. The ruling hinges on a controversial legal distinction between 'outcome' and 'occurrence' contracts, setting the stag...

**Legal Battle Over Prediction Markets Intensifies as Nevada Judge Denies Crypto.com Injunction** In a significant development for the prediction market industry, a Nevada federal judge has denied Crypto.com’s request for a preliminary injunction against the Nevada Gaming Control Board, marking a potential shift in the legal landscape for companies operating in this space. The ruling, issued last Thursday, comes amid ongoing tensions between crypto firms and state regulators, with implications for the future of prediction markets in the United States. ### A Split Ruling and the "Outcome" vs. "Occurrence" Debate Crypto.com, like its predecessor Kalshi, had sought to block state regulators from imposing rules on its prediction markets, arguing that the Commodity Futures Trading Commission (CFTC) holds exclusive authority over such contracts under the Commodity Exchange Act (CEA). However, Judge Andrew Gordon denied the injunction, a stark contrast to Kalshi’s earlier victory in the same court. The judge’s reasoning centered on a technical distinction: Crypto.com’s sports contracts, which are based on “outcomes” of events rather than “occurrences” or “non-occurrences,” do not qualify as “swaps” under the CEA. This classification is critical, as it determines whether the CFTC or state regulators have jurisdiction. “This idea that there is a distinction between ‘outcome’ and ‘occurrence’ that is legally significant is, in my view, completely fanciful,” said Aaron Brogan, a cryptocurrency attorney and founder of Brogan Law. He argued that the CEA’s definition of a swap explicitly includes contracts tied to “the occurrence, nonoccurrence, or the extent of the occurrence of an event,” suggesting the judge’s reasoning lacks legal foundation. ### Kalshi’s Win vs. Crypto.com’s Setback Kalshi, the current market leader, secured a major legal win earlier this year when Judge Gordon granted it an injunction against Nevada regulators. The contrast in rulings has left industry observers puzzled. Brogan noted that the judge’s decision against Crypto.com may hinge on subtle legal differences between the two cases, though the full transcript of the hearing—expected to be released in January—remains undisclosed. Crypto.com’s spokesperson emphasized the inconsistency, stating, “When two cases on the same issues before the same judge result in two completely different rulings, it guarantees a different result at the appellate level.” The company plans to appeal, maintaining that its contracts are swaps under CFTC jurisdiction. ### State Regulators and the Broader Industry Fight The Nevada Gaming Control Board celebrated the ruling as a victory, with a member declaring “the gig is up” during a recent meeting. However, legal experts like Brogan dismiss this as premature, predicting the decision will be overturned on appeal. The battle is not confined to Nevada. State regulators in Maryland, New Jersey, and others are actively challenging prediction markets, citing concerns over consumer protection and illegal gambling. The CFTC’s requirement for prediction market operators to obtain a designated contract market (DCM) license has further complicated matters, prompting crypto exchanges to leverage existing licenses to expand into derivatives markets. ### Crypto.com’s Unique Position Crypto.com stands out as the first crypto exchange to secure a full suite of CFTC licenses, including a DCM license through the North American Derivatives Exchange. Acquired in 2022, the company has partnered with Underdog Sports to launch sports prediction markets via the Underdog app, available in most U.S. states and Canadian provinces except Ontario. ### Growth Prospects and Uncertain Future Despite the legal hurdles, the prediction market industry is poised for growth. A Certuity report projects the market could reach $95.5 billion by 2035, with a 46.8% compound annual growth rate. Polymarket, another player, is preparing to launch its U.S. arm, signaling continued investor confidence. As the legal saga unfolds, the outcome of Crypto.com’s appeal could set a critical precedent. For now, the ruling underscores the complexities of regulating prediction markets at the intersection of federal and state law, leaving industry participants and regulators in a state of cautious anticipation. **Key Takeaways:** - Nevada Judge Gordon’s denial of Crypto.com’s injunction highlights legal ambiguities in classifying prediction markets. - The distinction between “outcome” and “occurrence” in the CEA remains a contentious point. - Kalshi’s previous win and Crypto.com’s appeal could shape the industry’s regulatory future. - State regulators continue to challenge prediction markets, while growth projections remain optimistic. As the battle intensifies, the path forward for prediction markets will likely depend on how courts interpret the CEA and the evolving relationship between federal oversight and state authority.

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 9 Oct 25
 9 Oct 25
 9 Oct 25