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Crypto.com's derivatives division has filed a federal lawsuit against the Nevada Gaming Control Board (NGCB) over the state's attempt to block its sports-related financial binary event contracts. The cryptocurrency exchange argues that these contracts are federally regulated financial instruments, not illegal sports wagering, and fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).
Crypto.com Challenges Nevada's Authority
North American Derivatives Exchange Inc., operating as Crypto.com's derivatives business, filed the complaint in U.S. District Court for Nevada. The lawsuit directly challenges a cease-and-desist letter issued by the NGCB on May 20, which threatened criminal and civil penalties if Crypto.com continued offering sports event contracts to Nevada residents. The NGCB contends these products constitute illegal sports wagering under state law.
Crypto.com asserts that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over its event-based derivatives contracts, arguing that the NGCB has no authority to regulate or prohibit trading offered by a federally regulated designated contract market.
Precedent From Similar Cases
Crypto.com's legal strategy is bolstered by recent federal court victories involving prediction marketplace KalshiEX. In April, a U.S. District Judge blocked Nevada gaming regulators from taking enforcement action against Kalshi, ruling that federal law preempts state authority over CFTC-regulated event contracts. Similar rulings have emerged from disputes with New Jersey gaming authorities, establishing a pattern of federal courts siding with CFTC-regulated platforms over state gaming boards.
These precedents suggest a consistent judicial interpretation that federal law, specifically the Commodity Exchange Act, overrides state gaming laws when it comes to CFTC-regulated financial instruments.
Regulatory Scrutiny and Business Impact
Both Crypto.com and Kalshi have previously faced scrutiny from the CFTC regarding Super Bowl-related contracts in February. While the federal regulator investigated compliance with derivatives regulations, both companies maintained the legality of their offerings. Crypto.com argues that complying with Nevada's demands, such as geo-fencing users, would violate federal rules requiring impartial access to these markets, causing irreparable harm to its business.
Crypto.com is seeking a permanent injunction to prevent Nevada from enforcing its gaming laws against its federally regulated derivatives business. Additionally, the company requests a declaratory judgment confirming that federal law preempts state gaming authority over CFTC-regulated event contracts.
Sources
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Crypto.com Exchange Takes Nevada to Court Over Event Contracts and Sports Betting Ban, Finance Magnates.
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Crypto.com Takes NGCB to Court Over Sports Contracts, The Crypto Times.
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Crypto.com sues Nevada regulator over block on sport event contracts, Cointelegraph.
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