Kalshi to use GeoComply to block Nevada users from sports markets

Kalshi has agreed to hire geolocation firm GeoComply and must have its software running in Nevada by Aug. 12 or face a $120,000-per-day fine, according to a joint stipulation filed in Carson City and released by the Nevada Gaming Control Board.

Under the court filing, GeoComply’s technology will be used to block trades from inside Nevada for the duration of a preliminary injunction the state won against Kalshi. The stipulation requires Kalshi to provide regular status updates to the regulator and led to the cancellation of a scheduled contempt hearing after state investigators repeatedly placed trades in markets that were meant to be blocked.

Nevada sued Kalshi earlier this year, arguing the company’s event-based contracts amount to gambling and that Kalshi, though regulated at the federal level, does not hold a Nevada gaming license. A state judge issued a preliminary injunction more than two months ago preventing Kalshi from offering certain markets to Nevada residents. Court papers show Kalshi acknowledged earlier blocking efforts were not fully effective.

Kalshi’s initial system relied on users’ internet protocol addresses and residency checks. The company spent less than $200,000 developing and testing the in-house IP-based and residency-based blocks, using family and friends for tests, the filing said. Nevada investigators were still able to place trades in sports-, election- and entertainment-related contracts while those measures were in place.

The joint stipulation noted, “Kalshi acknowledges that, notwithstanding Kalshi’s implementation of IP-based and residency-based trading blocks, the state’s investigators have successfully placed trades in sports-, election-, and entertainment-related event contracts during the pendency of the court’s amended PI order.” The filing also said Kalshi does not concede that those trades alone justify a contempt order and reserved its legal defenses.

Mike Dreitzer, chair of the Nevada Gaming Control Board, issued a statement saying the board will enforce the terms and that Kalshi will face penalties if it does not comply. The Nevada agreement mirrors action in Michigan, where an Ingham County judge ordered Kalshi to use a third-party geofencing provider and set an Aug. 12 deadline with a potential $500,000-per-day fine for noncompliance.

The dispute has drawn federal attention. The U.S. Commodity Futures Trading Commission chair issued an order instructing Kalshi to disregard the state court rulings, and the matter was discussed at a House Agriculture Subcommittee hearing. Robert Schwartz, a partner at Morgan, Lewis & Bockius and a former CFTC general counsel, noted at the hearing that the situation highlights the need for better cooperation between state and federal regulators.

Kalshi did not immediately respond to requests for comment. The company must have the GeoComply geofencing solution operational in Nevada by Aug. 12 or face the court-imposed daily fines.