Kalshi, Polymarket lose bids to halt Nevada and Washington gambling cases

Prediction market giants Kalshi and Polymarket lost their bids to stop gambling-related cases against them in the U.S. states of Nevada and Washington.

Among orders issued on Thursday, a Ninth Circuit Panel denied requests from Kalshi and Polymarket to block lower-court rulings, sending the cases back to state court.

The judges said the companies failed to show they would succeed in arguing the cases instead belonged in federal court.

It is another setback for federally regulated prediction market platforms that have argued the Commodities and Futures Trade Commission holds "exclusive jurisdiction" over event outcome contracts in areas like sports and politics.

Nevada and Washington argue that those contracts amount to unlicensed gambling under their state laws.

Nevada's cases against the Kalshi and Polymarket are largely over the platforms' lack of gaming licenses, while Washington's lawsuit centers on whether Kalshi offers illegal gambling products.

That does not automatically create federal jurisdiction simply because the companies raised federal preemption defenses, the court said.

"The CEA preemption defense is an affirmative defense, which cannot by itself give rise to federal question jurisdiction," the panel wrote in the orders.

The court also rejected Polymarket's argument that it was operating under federal direction because it complied 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 wrote.

States vs CFTC

Earlier this year, a New Jersey appeals court sided with Kalshi and upheld an injunction blocking the state's efforts to stop sporting event outcome contracts. But courts in Ohio, Maryland and Nevada have been increasingly siding with state gambling regulators.

In April, Nevada state Judge Jason Woodbury extended a ban on Kalshi's sports-related contracts, calling the offerings "indistinguishable" from placing bets through licensed sportsbooks.

The CFTC and DOJ have meanwhile launched a counteroffensive against several states, including Minnesota, Illinois, Arizona and Connecticut, arguing that they are unlawfully interfering with federally regulated derivatives markets.