Nevada turns North Carolina's tax deal into a preemption weapon

Abigail Pace, a deputy attorney general in Nevada, filed papers with the Ninth Circuit on Thursday that reframe the entire federal preemption argument in one move. Her logic is simple and, on its face, difficult to answer: if Kalshi is willing to accept a state tax on its trading revenue in North Carolina, it has already conceded that a state can reach into its operations. The Nevada gaming laws Kalshi is fighting in court are, on this reading, a different instrument applied to the same acknowledged authority.

The North Carolina legislation is worth pausing on. Senate Bill 257 lets federally regulated exchanges operate without a separate state gaming licence, and it imposes a six percent tax on trading fee revenue attributable to state residents. Kalshi has embraced this arrangement. Nevada's argument is that you cannot accept one state's hand on your books and then tell a second state that federal law leaves no room for it to act.

Kalshi's counter is a distinction between regulation and taxation — the argument that a tax on revenue is formally different from a rule on conduct. Pace's filing addresses this directly and calls it a formalism. Illinois, which imposed a tiered transaction tax on sports-related exchange wagers and required operators to obtain a state sports-betting licence, suggests the line between tax and regulation is already blurred in practice. Kalshi has sued Illinois to overturn that law, which means the same company is now simultaneously defending one state tax as legitimate and attacking another as preempted. The Ninth Circuit will notice.

The reporting here points toward a conclusion the coverage has not yet assembled. Kalshi built its federal preemption argument on the proposition that the Commodity Exchange Act creates a uniform national regime that states cannot supplement. North Carolina's legislation, which Kalshi accepted, was drafted precisely to work within that regime — it codifies CFTC oversight rather than replacing it. Nevada's filing argues this acceptance proves Kalshi knows the line is porous. That argument is stronger than it looks, because it does not require the court to decide whether preemption is valid in principle. It only requires the court to hold Kalshi to what it has already agreed to elsewhere.

Whether the Ninth Circuit treats Pace's argument as a procedural point or as a substantive concession depends on how the panel reads the North Carolina posture. But the consensus read — that Kalshi's federal preemption defence is intact and the state challenges are a rearguard action — deserves more scepticism than it is currently receiving. A company that accepted state jurisdiction for tax purposes in one state is in a materially weaker position arguing that no state has jurisdiction in another. Pace has found the seam, and she filed on it.