Amid the legal turmoil, Kalshi was temporarily banned in Nevada

Kalshi is not having a very good week. On Tuesday, Arizona’s attorney general filed a 20-count criminal complaint against the online prediction market, accusing it of running an illegal gambling business in the state. Now, another southwestern state has made a big move for the company: A judge in Nevada has temporarily banned the service from operating in the state as part of an ongoing lawsuit brought by state regulators.

The state of Nevada, on behalf of the Gaming Control Board, filed a lawsuit against Calci in February in an attempt to prevent the prediction site from operating in the state. Officials contend that Kalshi failed to obtain the proper state gaming licenses that would cover the type of betting activity its users engage in, and that by allowing users under the age of 21 to use its services, it is violating state law.

Earlier this month, the state requested a temporary restraining order against Kalci as part of her ongoing case. In state court on Friday, Judge Jason D. Woodbury granted the state’s request and scheduled a hearing on the restraining order for early next month, court documents show.

Woodbury wrote in his order that Calci was not licensed under the Nevada Gaming Control Act, and that given Calci’s policy of taking a commission from contracts purchased through its system, it was clearly running a “percentage game” (which the state defines as gambling).

Calci has argued that because it is registered with the CFTC, it falls within that federal agency’s exclusive regulatory scope, which should exempt it from state laws, court documents show. However, Woodbury noted that the question of whether federal law trumps state law remains unsettled at the moment, but the courts have not leaned in that direction.

Kalci declined to comment on the development when contacted by TechCrunch. Wired first reported the judge’s decision. Reuters reported that Nevada had previously persuaded judges to ban Calci competitors like Coinbase and Polymarket.

The Nevada case that the prediction market finds itself in is just one of a growing number of state cases across the country seeking to argue that sites like Kalshi and Polymarket are illegal operations that circumvent the state’s gambling laws.

Conversely, current federal officials have positioned themselves as protectors of the forecasting industry. Case in point: In the wake of Arizona’s decision to bring criminal charges against Calci earlier this week, CFTC Chairman Mike Selig came out swinging against the decision, posting online: “The Arizona Attorney General today filed criminal charges against one of our registered exchanges related to prediction markets. This is a jurisdictional dispute and is completely inappropriate as a criminal prosecution. The @CFTC is monitoring this closely and weighing its options.”

The increasingly hostile stance of state officials and the leniency of the Commodity Futures Trading Commission (CFTC) have ensured a regulatory battle between states and the federal government over prediction markets and their future.