Prediction market platforms Kalshi and Polymarket suffered a legal setback after a federal appeals court refused to block gambling-related cases against them in Nevada and Washington.
A three-judge panel from the Ninth Circuit Court denied emergency requests from both companies, meaning the cases will now continue in state courts.
The judges ruled that federal oversight under the Commodity Exchange Act (CEA) does not automatically protect prediction market platforms from state gambling laws. The court said that using the CEA as a defense is not enough to move the lawsuits into federal court.
Polymarket also argued that it was operating under federal direction because it follows rules connected to oversight by the Commodity Futures Trading Commission (CFTC). However, the judges rejected that claim, saying compliance with federal law alone does not mean a company is acting on behalf of a federal agency.
The cases in Nevada focus on accusations that the platforms operated without proper state gaming licenses. In Washington, officials are challenging whether Kalshi’s sports event contracts should be treated as illegal gambling products.
The ruling adds more uncertainty to the growing prediction market industry, especially as courts across the United States continue to disagree on how these platforms should be regulated.
Earlier, the Third Circuit Court sided with Kalshi in a separate case involving New Jersey regulators, creating a legal split that could eventually push the issue to the US Supreme Court.
Interestingly, all three judges involved in the latest ruling — Ryan Nelson, Bridget Bade, and Kenneth Lee — were appointed during President Donald Trump’s first term.
The decision also came on the same day Kalshi announced the launch of “Americans for Fair Markets,” a new advocacy group created to push back against efforts from the gaming industry to restrict prediction markets.
