Federal Court Hands Nevada a Win, Paving Way for Potential Ban on Prediction Markets Kalshi and Polymarket
A federal court decision has significantly escalated the legal threats facing prediction market platforms Kalshi and Polymarket in Nevada, potentially setting a precedent for state-level crackdowns across the U.S.
On Monday, a U.S. district judge ruled that Nevada's lawsuits against the companies belong in state court, rejecting the platforms' arguments that federal commodities law grants them exclusive jurisdiction. The ruling empowers the Nevada Gaming Control Board to seek temporary injunctions that could immediately block Nevada residents from trading event contracts—which let users bet on outcomes of political, financial, or cultural events—while the case proceeds.
Legal documents reviewed by Decrypt show the court found that the Commodity Exchange Act does not "completely preempt" state law claims in this context. "A plain reading of the CEA's savings clause shows Congress did not intend to completely displace ordinarily applicable state law," the filing stated, undermining a core defense used by prediction markets.
"This is a pivotal setback for these platforms," said legal analyst Daniel Wallach, who first flagged the ruling. "It brings Nevada one step closer to becoming the first state to successfully force Kalshi to cease operations via court order. The domino effect could be severe—once a platform geofences one state, it becomes harder to claim that doing so elsewhere causes 'irreparable harm.'"
In a parallel ruling the same day, the court also sent Nevada's case against Polymarket's parent company, Blockratize, back to state court. Polymarket has since filed an emergency motion seeking a brief stay as it prepares an appeal.
The decisions arrive amid explosive growth for prediction markets, with total trading volume surging to roughly $63.5 billion in 2025, a fourfold increase from the previous year, according to blockchain security firm CertiK. However, regulatory uncertainty persists. While a 2024 federal ruling established that event contracts aren't inherently gambling under federal law, it did not strip states of their own authority to regulate gambling—a distinction that now lies at the heart of the legal conflict.
"If a meaningful number of states follow Nevada's lead, platforms face a brutal choice: build costly, state-by-state compliance regimes or geo-block restricted states," a CertiK representative told Decrypt. "Both options fragment liquidity, which strikes at the very core of what makes prediction markets valuable."
The tension highlights a broader constitutional clash between federal oversight of financial derivatives and states' traditional control over gambling—a conflict some experts believe is destined for the Supreme Court. "I 100% think it's going to go to the Supreme Court," former Interim CFTC Chair Caroline Pham said recently at a Stanford Blockchain Club event, framing it as a Tenth Amendment battle.
For Kalshi, a potential next step is an emergency application to Justice Elena Kagan, who oversees the Ninth Circuit, seeking a temporary stay. However, success is not guaranteed. "Without an expedited process from the Ninth Circuit, it might be a tough ask," Wallach noted.
Industry observers warn the rulings could embolden other state regulators. "States may soon begin to pursue this strategy with greater frequency," Wallach cautioned, suggesting that what happens in Nevada may not stay in Nevada.
Decrypt has reached out to Kalshi, Polymarket, and the Nevada Gaming Control Board for comment.
Reactions & Analysis
Marcus Chen, Fintech Compliance Officer: "This isn't just about Nevada. It's a blueprint. State regulators have been watching, and this ruling gives them a clear, low-risk path to challenge these platforms. The operational headache for Kalshi and Polymarket just became a migraine."
David Park, Retail Trader & Prediction Market Enthusiast: "It's incredibly frustrating. These platforms offer a legitimate way to hedge opinions and gain insights. Pushing them out state-by-state feels like protectionism for old-guard casinos dressed up as consumer protection. They're killing innovation in its crib."
Eleanor Vance, Professor of Regulatory Law: "The court correctly identified the jurisdictional limits here. The CFTC's oversight of the *mechanism* of trading doesn't immunize a platform from state laws governing the *substance* of what is being traded, especially when it walks and talks like gambling to a state regulator."
Rebecca Torres, Consumer Advocacy Group Spokesperson: "Good. These 'event contracts' are often just speculative gambling on tragedies, elections, and public health crises, marketed to a new generation. States have every right to protect their residents from potential harm and fraud. Federal regulators have been asleep at the wheel."