Nevada Court Halts Polymarket Operations, Spotlighting Legal Peril for U.S. Prediction Markets
Prediction markets, where users can place bets on everything from election outcomes to cryptocurrency prices, have surged in popularity on blockchain platforms. Polymarket, operating on the Polygon network, has been at the forefront of this trend, allowing users worldwide to trade shares on thousands of speculative events.
In the United States, however, the legal landscape for gambling is a complex patchwork. While sports betting is permitted in 39 states, online casinos are far more restricted. This regulatory fragmentation has now ensnared Polymarket. Last week, a Nevada state court sided with the Nevada Gaming Control Board (NGCB), issuing a 14-day restraining order against the platform for offering unlicensed event-based betting to Nevada residents ahead of a February 11 hearing.
The core of the dispute lies in classification. The NGCB contends that Polymarket's contracts are functionally identical to sports wagers under Nevada law, thus requiring a state gambling license. Polymarket, in contrast, argues it operates a compliant derivatives exchange under the oversight of the Commodity Futures Trading Commission (CFTC), where shares are financial instruments for hedging or prediction, not mere bets.
The court rejected Polymarket's defense, finding that its unlicensed operation undermines the state's regulatory structure and poses "irreparable harm" to its duty to protect citizens. In response, Polymarket has begun geo-blocking access for users in Nevada.
The ruling's implications extend far beyond a single state. It signals that other states may aggressively apply their gambling statutes to prediction markets, potentially forcing platforms to secure licenses in all 50 jurisdictions or abandon key markets like sports betting—a major driver of trading volume. This creates a stark divide: centrally regulated platforms like Kalshi operate with federal approval, while decentralized apps face a daunting, state-by-state legal gauntlet.
Market reaction has been swift. POL, the token powering the Polygon network, was down approximately 15% in the week following the news, trading around $0.10. The decision follows a broader pattern of U.S. regulatory scrutiny, where agencies like the SEC often act first, leaving courts to delineate authority. Prediction markets, sitting at the volatile intersection of crypto, finance, and gambling, are particularly vulnerable.
Looking ahead, states like New York and California are already moving to tighten rules. New York's proposed ORACLE Act, for instance, could ban contracts related to elections, gaming, and geopolitical conflicts. For builders, this environment raises costs and legal risks; for users, it increases the likelihood of sudden access blocks or frozen funds during live markets.
User Reactions
Marcus Chen, Fintech Analyst in San Francisco: "This is a predictable but significant escalation. Nevada is drawing a line in the sand, treating these contracts as gambling instruments. It forces the fundamental question: are prediction markets a financial innovation or a sophisticated betting shop? The answer will determine their viability in the U.S."
David Rivera, Retail Investor in Miami: "It's frustrating. These platforms offer a way to hedge real-world risks or express a view on events. To shut them down state-by-state feels like protecting old casino monopolies more than protecting consumers. The regulatory ambiguity is stifling."
Eleanor Vance, Policy Advocate in Washington D.C.: "This ruling is a necessary corrective. Allowing unlicensed, offshore-linked platforms to operate prediction markets with zero consumer protections or responsible gambling safeguards is reckless. Nevada is right to enforce its laws. This isn't innovation; it's regulatory arbitrage."
Riley James, Crypto Developer in Austin: "It's a mess. We're building in a space where the rules change at every state border. This decision will chill development and push innovation—and users—to jurisdictions with clearer rules. The U.S. is risking its edge in fintech over a classification debate."