Kalshi Took North Carolina's Tax. Nevada Just Filed It as Evidence

A two-page letter to the Ninth Circuit argues that a company claiming federal law bars state regulation cannot then accept a state tax on the same contracts. The panel has been sitting on this case since April.

• Nevada's Attorney General filed a two-page letter with the Ninth Circuit Court of Appeals on Thursday, written by Deputy Attorney General Abigail Pace and first surfaced by gaming attorney Daniel Wallach
• It argues that Kalshi's acceptance of North Carolina's new tax on prediction markets contradicts the federal preemption case it is running in California
• North Carolina's Senate Bill 257, signed by Governor Josh Stein on 7 July as part of the state budget, imposes a 6% tax on net trading-fee revenue from North Carolina residents from 1 January 2027, and states explicitly that it carries no licensing, registration or other regulatory obligation
• Kalshi accepted that arrangement and has separately sued Illinois over its own levy of 1.75% on the first five million wagers and 3.5% thereafter, alongside a $15 million four-year licence
• The Ninth Circuit heard consolidated appeals from Kalshi, Crypto.com and Robin Hood Derivatives on 16 April before judges Ryan Nelson, Bridget Bade and Kenneth Lee, and has not yet ruled

Two Pages Aimed at a Single Inconsistency

Nevada's filing is short and does one thing. Deputy Attorney General Abigail Pace tells the Ninth Circuit that Kalshi has conceded, in North Carolina, the proposition it denies in California.

Kalshi's case rests on preemption. Sports event contracts are swaps under the Commodity Exchange Act, the argument runs, the Commodity Futures Trading Commission has exclusive jurisdiction over swaps, and state gambling law is therefore displaced. Nevada says accepting a state tax on revenue from those same contracts cannot be squared with it.

"A stunning about-face, which would mean that (at a minimum) Kalshi cannot evade Nevada's taxing provisions," Pace wrote.

She anticipated the obvious response, that being taxed is not the same as being regulated. "Kalshi attempts to draw a distinction between regulating its contracts and taxing its revenue from these contracts, but that is purely a formalism," the filing says.

The North Carolina measure is unusual enough to be worth stating precisely. Senate Bill 257, signed by Governor Josh Stein on 7 July as part of the state's budget, taxes prediction market operators at 6% of net trading-fee revenue attributable to North Carolina residents, effective 1 January 2027. The statute goes out of its way to say the levy carries no licensing, registration or other regulatory obligation of any kind. North Carolina has taken a cut while formally conceding it is not the regulator.

Kalshi did not fight it. It is fighting Illinois, which took a different route: 1.75% on the first five million wagers, 3.5% above that, and a $15 million licence over four years.

The timing is what gives the filing weight. The Ninth Circuit heard consolidated appeals from Kalshi, Crypto.com's North American Derivatives Exchange and Robin Hood Derivatives on 16 April, before judges Ryan Nelson, Bridget Bade and Kenneth Lee, all appointed during President Trump's first term. Reporting from the hearing described the panel as leaning Nevada's way, which would extend a run in which Kalshi has lost repeatedly at state level while winning federally. Four months on, no decision has issued, and a supplemental letter is the only way a party still gets to speak.

A Tax You Accept Is an Argument You Lose

Pace's formalism line is the whole filing and it is stronger than it first sounds. Preemption under the Commodity Exchange Act is a claim about who holds authority over a class of transactions, not a claim about which specific powers a state chooses to exercise. If North Carolina may take 6% of the revenue from these contracts, North Carolina has authority over them, and if it has authority over them the field is not exclusively federal. Kalshi's answer has to be that taxation and regulation are separate sovereign powers, which is true as a matter of general law and awkward here, because its entire case depends on the contracts being federal instruments that states cannot reach. You cannot be beyond a state's reach and within its tax base at the same time without explaining which part of the state's power stops at the door.

Accepting One Tax and Suing Over Another Is the Vulnerable Part

The inconsistency Nevada is pointing at is not really between Kalshi and North Carolina. It is between Kalshi and Kalshi. Accepting a 6% levy in one state while suing another over 1.75% is a commercial judgment that makes perfect sense, and it is very hard to dress up as a principle. The obvious distinction is that Illinois attached a $15 million licence to its tax, which looks like regulation, while North Carolina expressly disclaimed regulation. That is a real difference and Kalshi will argue it. But it concedes the underlying point: the company is sorting state measures by how much they cost and how they are labelled, not by whether states have power at all. Once a court sees that sorting, the preemption argument stops being a boundary and starts being a negotiation.

North Carolina Has Written the Template Other States Will Copy

For the industry the North Carolina statute matters more than the Nevada filing. We described it in July as the first state levy of its kind, a pragmatic way to capture money while leaving prediction markets outside the state's consumer-protection framework. What Nevada has now shown is the second use for it, as evidence. The asymmetry it creates is stark either way: the same budget raised North Carolina's sports betting tax to 23% while taxing a prediction market at 6% of trading fees. Every licensed sportsbook in that state is now paying a multiple of what its unlicensed-looking competitor pays on the same sporting outcome. That is the commercial grievance the American Gaming Association and state regulators have been making all year, now with a number and a statute behind it. Expect copies, and expect operators to point at the gap every time one is proposed.

Nevada has spent eighteen months arguing that Kalshi is a bookmaker. On Thursday it tried something narrower and harder to answer: that Kalshi has already behaved like one.