Kalshi and Polymarket lost bids to block gambling cases in Nevada and Washington.
Summary
- A Ninth Circuit panel denied emergency motions from both platforms to halt state-level gambling enforcement actions.
- The judges ruled that federal derivatives oversight does not automatically shield prediction markets from state gaming laws.
- The decision deepens a growing legal split over whether sports event contracts are federally regulated swaps or gambling products.
A three-judge Ninth Circuit panel denied emergency motions from both Kalshi and Polymarket to block lower court rulings, sending gambling enforcement cases in Nevada and Washington back to state courts. The orders came down on Thursday.
The judges concluded that raising a defense under the Commodity Exchange Act does not create federal jurisdiction that would move the cases out of state courts. “The CEA preemption defense is an affirmative defense, which cannot by itself give rise to federal question jurisdiction,” the panel wrote.
Why this matters for prediction market regulation
The court also rejected Polymarket’s argument that it was operating under federal direction through its compliance with CFTC oversight requirements. “Polymarket’s actions merely demonstrate its own compliance with federal law, which cannot alone show that it is acting under a federal officer,” the judges stated.
Nevada’s cases center on both platforms’ lack of state gaming licenses. Washington’s lawsuit focuses on whether Kalshi offers illegal gambling products through its sports event contracts.
The ruling adds to a growing split among federal courts over prediction market jurisdiction. The Third Circuit sided with Kalshi in an earlier case, upholding a preliminary injunction against New Jersey gambling regulators. That divergence could eventually push the question to the Supreme Court.
All three judges on the panel, Ryan Nelson, Bridget Bade, and Kenneth Lee, were appointed by President Trump during his first term. The decision came the same day Kalshi launched Americans for Fair Markets, a new advocacy group aimed at countering the gaming lobby’s campaign against prediction markets.
Kalshi, Polymarket, and Washington’s attorney general did not immediately respond to requests for comment. Nevada’s gaming control board declined to comment, citing pending litigation.
