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The derivatives arm of crypto exchange Crypto.com has sued the Nevada gaming and gambling regulator 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.”
They claim the Nevada Gaming Control Board (NGCB) asserted jurisdiction with the “mistaken premise” that contracts traded on the exchange constitute “wagering on sporting events” subject to Nevada gaming laws. The complaint notes that the NGCB sent out a cease and desist letter to Crypto.com on May 20 that threatened both civil and criminal penalties.
Crypto.com insisted that 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.
Two cases involving prediction market Kalshi were cited in regard to federal injunctions where the 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.
The firm asserts that its sports derivatives contracts are certified and permitted under federal law.
“It could not possibly comply with Nevada gaming regulations and the CFTC’s core principle of impartial, not location-based, access,” it stated.
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.
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