Nevada Says Kalshi Geofence Doesn’t Work, Calls For Daily Penalties Until it Does

The state of Nevada has asked for Kalshi to be held in contempt of court, claiming that the prediction market is violating a court order because its in-house geofencing tool does not work properly.

The state submitted the request Friday in the First Judicial District Court for the State of Nevada. Nevada is also asking for the court to order Kalshi to pay monetary penalties for every day that its geofencing is deemed inadequate. The state estimates that this should be $120,000 per day, by calculating 1/50 of Kalshi’s estimated daily fees.

Nevada’s First Judicial District Court is the only court in the nation, at federal or state level, to issue an order that has actually required Kalshi to block sports contracts in a state. Initially, it ordered the state to ban Nevada residents from trading sports, entertainment, and politics contracts in March, before requiring the prediction market to geofence — something Kalshi has claimed is prohibitively expensive, despite being common practice for sportsbooks — in May.

While Kalshi took steps to implement geofencing, the state says that its geolocation services do not work, which means in practice it is not complying with the order.

“The Court has required Kalshi to stop offering covered event contracts in Nevada. We will continue to vigorously enforce Nevada law to safeguard gaming in our state,” Nevada Gaming Control Board Chairman Mike Dreitzer said in a press release. 

In its court filings, the state said Kalshi contracts that were supposed to be banned could still be purchased by individuals in Nevada.

“Kalshi is simply not complying with the order,” the state wrote in its request for an injunction. “People located within Nevada are easily able to go to Kalshi’s platform and purchase Kalshi’s sports, election, and entertainment-related contracts.”

IP-based geofencing

The state says that Kalshi’s geofencing tool uses an individual’s IP address, which can be bypassed by VPNs. Kalshi has called for crackdowns on rival Polymarket’s global site, which uses IP addresses to block U.S. users, noting that these blocks can be circumvented with a VPN. Geolocation services for sportsbooks usually use a combination of factors including GPS to determine a user’s actual location.

Nevada‘s brief also notes that internet service providers are not required to assign IP addresses based on sub-national regions, and IP addresses for mobile devices are inherently not fixed to one location, so even without any attempts to bypass the block, using IP addresses to block one state can be unreliable. The state cited one estimate of the success rate of state-level IP blocking, which put it between 55% and 80%.

Nevada’s brief says that state investigators purchasing event contracts were able to do so even without the use of VPNs.

The state adds that despite a $22 billion valuation, Kalshi spent only $190,000 on its geofencing tool. It says that the business used “family and friends” to test whether the tool worked. Kalshi had previously argued that geofencing could cost into the “tens of millions.”

Nevada notes that Kalshi had also previously argued that IP-based geofencing would not be sufficient, when it attempted to prove that geofencing Nevada would be too costly to be required.

“Kalshi’s own submission confirms that it is flagrantly violating the court’s order,” it said.

The filing adds that Nevada Gaming Control Board staff were “repeatedly able to purchase covered event contracts” on Kalshi, despite the geofencing requirement.

The state argues that the issues with Kalshi’s geolocation system are not simply an error, and instead are part of a deliberate strategy “to feign compliance so it can keep racking up enormous profits for as long as it can get away with it.”

InGame has reached out to Kalshi for any response to the state’s filing but has not heard back as of the time of publication.