Kalshi, Polymarket Fail to Pause Nevada and Washington Suits (1)

Nevada and Washington’s enforcement actions against prediction market providers can proceed in state courts, a federal appeals court said.

Neither Kalshi Inc. nor Polymarket demonstrated that litigating in state court would cause them irreparable harm or that they were likely to succeed with their arguments that the US Court of Appeals for the Ninth Circuit has federal question jurisdiction, the appeals court said Thursday.

The trio of orders denied them stays pending appeal of federal district orders remanding to state courts Nevada’s enforcement actions against Kalshi and Polymarket and Washington’s case against Kalshi.

Federal question jurisdiction is one way federal courts are allowed to hear cases. Nevada challenges Kalshi and Polymarket’s lack of a state license while Washington questions whether Kalshi is offering illegal gambling, which doesn’t necessarily raise a federal issue, Judges Ryan D. Nelson, Bridget S. Bade, and Kenneth K. Lee said.

The prediction markets’ argument that a federal law preempts Nevada and Washington gaming laws “is an affirmative defense, which cannot by itself give rise to federal question jurisdiction,” the panel of President Donald Trump appointees said.

“Principles of federalism and comity tip the balance of hardships and public interest in favor of allowing” the states to enforce their laws in state court, they said.

The same Ninth Circuit panel appeared skeptical of prediction markets’ views on sports event contracts during April oral arguments between Nevada and Kalshi, Crypto.com, Robinhood Markets Inc., and the US agency that oversees derivatives trading.

Prediction markets let people put money on a wide range of yes-no outcomes, from whether Texas Attorney General Ken Paxton will become the Republican Senate nominee in the state’s election to whether Boston Legacy FC will win its National Women’s Soccer League game Friday night.

Sports prediction markets sparked a nationwide legal dispute over regulatory control of the multibillion dollar industry.

States contend these products are glorified forms of gambling, an industry historically subject to their regulations.

Prediction market platforms, with the backing of the Trump administration’s US Commodity Futures Trading Commission, say these contracts are a form of hedging derivative swept under the CFTC’s sole purview through a 2010 update to the Commodity Exchange Act. The CEA, granting “exclusive jurisdiction” to the CFTC over “swaps” on these designated contract markets, preempts state laws, they say.

Circuit Split

The Third Circuit was the first appeals court to weigh in on the issue that’s splitting district courts in preliminary decisions. The 2-1 decision siding with Kalshi upheld a preliminary injunction against New Jersey gambling regulators.

The question of preemption is before multiple federal appeals courts. A split between them would make the issue more appetizing to the Supreme Court for review.

Kalshi, Polymarket, and Washington’s attorney general office didn’t immediately respond to emails seeking comment. Nevada’s gaming control board declined to comment, citing pending litigation.

Milbank LLP, Bailey Kennedy LLP, and Corr Cronin LLP represent KalshiEX LLC. Gibson, Dunn & Crutcher LLP, Hutchison & Steffen PLLC, and Cooper & Kirk PLLC represent Polymarket.

The cases are Nev. v. KalshiEX, LLC, 9th Cir., No. 26-1304, 5/21/26, Nev. v. Blockratize, Inc., 9th Cir., No. 26-1343, 5/21/26, and Wash. v. KalshiEX, LLC, 9th Cir., No. 26-3106, 5/21/26.