The derivatives arm of crypto exchange Crypto.com has sued the Nevada gaming and gambling regulator over its restriction on the trading of sporting event contracts.
North American Derivatives Exchange, Inc., which does business as Crypto.com’s North American derivatives business, sued the Nevada Gaming Control Board (NGCB) in the state’s federal court on June 3, claiming it improperly blocked the exchange from offering “derivative contracts that reference sporting events on its federally regulated market.”
It claimed the regulator asserted jurisdiction with the “mistaken premise” that contracts traded on the exchange constitute “wagering on sporting events” subject to Nevada gaming laws.
Crypto.com argued that federal law, specifically the Commodity Exchange Act, grants the Commodity Futures Trading Commission exclusive jurisdiction over these types of financial instruments.
“NGCB has no authority to regulate, let alone prohibit, derivatives trading offered by a federally regulated DCM [designated contract market] operating pursuant to federal law,” it claimed.
It cited two recent federal injunctions involving predictions marketplace KalshiEX, where courts ruled that state gaming authorities in Nevada and New Jersey could not regulate federally approved event contracts.
The courts ruled that the Commodity Exchange Act preempts state law and that the CFTC has exclusive authority.
“Federal courts have consistently recognized that the CFTC’s regulation of the national derivatives market is exclusive and preempts state involvement,” Crypto.com argued.
According to the complaint, the NGCB sent Crypto.com a cease-and-desist letter on May 20 that threatened criminal and civil penalties unless the exchange stopped offering its sports event contracts to Nevada residents.
The firm asserts that its sports derivatives contracts are certified and permitted under federal law, state interference causes “irreparable harm” to its business, and it cannot feasibly comply with Nevada’s demands, such as geo-fencing users, without violating federal rules requiring impartial access.
The firm is seeking a permanent injunction stopping Nevada from enforcing its gaming laws and a declaratory judgment affirming federal preemption.
CFTC probed Super Bowl contracts
In February, the CFTC investigated derivatives contracts tied to the Super Bowl that Crypto.com and Kalashi offered.
“We firmly believe in the legality of our events contracts and believe the CFTC is the appropriate regulator to bring federally regulated market integrity, manipulation controls, and product availability in all 50 states,” Crypto.com told Cointelegraph at the time.
In March, Kalshi filed a similar lawsuit against the NGCB and the New Jersey Division of Gaming Enforcement, after it received cease-and-desist orders from both regulators directing the company to halt all sports contracts.