A federal judge has sent legal disputes involving prediction markets Kalshi and Polymarket back to Nevada state court, potentially paving the way for injunctions that could halt trading in the state. The court ruled that the Commodity Exchange Act does not completely preempt Nevada's gaming law claims, allowing state regulators to pursue injunctions.
This decision could prompt other states to take similar actions against platforms like Kalshi and Polymarket, which argue that the Commodity and Futures Trading Commission (CFTC) holds exclusive jurisdiction over their event contracts. If Nevada secures an injunction, Kalshi could be barred from offering services to state residents.
Legal analysts suggest this setback for Kalshi could make it harder to argue against similar geofencing requirements in other states. In a parallel ruling, a similar case against Polymarket's parent company was also sent back to state court. Both companies are considering appeals, with Polymarket seeking a stay while preparing its case. The outcome could have significant implications for the rapidly growing prediction market industry, potentially fragmenting liquidity and forcing platforms to navigate complex state-by-state compliance.