Court rejects Kalshi, Polymarket bids to move gambling suits

On Thursday a Ninth Circuit panel refused requests from Kalshi and Polymarket to block state-court gambling lawsuits in Nevada and Washington, leaving the cases to proceed in state court.

The panel denied emergency appeals that asked the court to take the matters out of state jurisdiction, finding the companies had not shown they were likely to prevail on federal-jurisdiction arguments.

“The CEA preemption defense is an affirmative defense, which cannot by itself give rise to federal question jurisdiction,” the panel wrote in its orders.

Nevada's cases focus on whether the platforms must hold state gaming licenses. Washington's complaint targets whether Kalshi offered illegal gambling products. Both companies have argued the Commodity Exchange Act and oversight by the Commodity Futures Trading Commission provide federal authority over event-outcome contracts tied to sports and political events.

The court said raising a federal preemption defense does not automatically create federal jurisdiction.

Polymarket argued it was acting under federal direction because it complied with CFTC oversight requirements. The court rejected that claim: “Polymarket's actions merely demonstrate its own compliance with federal law, which cannot alone show that it is acting under a federal officer,” the judges wrote.

The decisions come amid a split of rulings across the country. Earlier this year a New Jersey appeals court ruled for Kalshi and left in place an injunction that blocked the state's effort to stop sporting-event outcome contracts. Courts in Ohio, Maryland and Nevada have issued rulings favoring state gambling regulators in related cases.

In April Nevada state Judge Jason Woodbury extended a ban on Kalshi's sports-related contracts, calling the offerings “indistinguishable” from placing bets through licensed sportsbooks.

The Commodity Futures Trading Commission and the Justice Department have contested state enforcement actions in several states, including Minnesota, Illinois, Arizona and Connecticut.

Kalshi and Polymarket operate online prediction markets where users buy and sell contracts tied to future events. The Ninth Circuit's orders return the Nevada and Washington suits to state court, where judges will decide whether the platforms' contracts violate state gaming statutes or require state licensing.

Courts in different jurisdictions have reached varying conclusions on similar legal questions.