A federal appeals panel has turned down emergency motions from prediction market operators Kalshi and Polymarket, allowing state gambling lawsuits in Nevada and Washington to proceed. The Ninth Circuit’s May 22 ruling determined that arguments based on the Commodity Exchange Act do not automatically grant federal court jurisdiction. The panel emphasized that a CEA preemption defense is an affirmative claim and cannot, on its own, move a case from state to federal court.
The judges also dismissed Polymarket’s contention that its adherence to Commodity Futures Trading Commission oversight meant it was operating as a federal agent. The court noted that simply complying with federal law does not equate to acting under federal direction.
Nevada’s enforcement actions focus on both platforms operating without required state gaming licenses. Washington’s lawsuit specifically targets Kalshi for offering sports event contracts that state officials deem illegal gambling products.
This decision highlights a deepening legal divide among federal courts regarding prediction market regulation. The Third Circuit previously supported Kalshi by granting a preliminary injunction against New Jersey gaming authorities. That contradictory outcome raises the likelihood that the U.S. Supreme Court may eventually need to resolve the dispute.
The panel consisted of three judges appointed during President Trump’s first term: Ryan Nelson, Bridget Bade, and Kenneth Lee. On the same day as the ruling, Kalshi announced the formation of Americans for Fair Markets, a new advocacy group intended to push back against the gaming industry’s efforts to restrict prediction markets. Representatives from Kalshi, Polymarket, and the Washington attorney general’s office have not yet commented. Nevada’s gaming control board declined to discuss the case due to ongoing litigation.