The US Court of Appeals for the Ninth Circuit denied stays for both Kalshi and Polymarket on May 22, allowing state-level gambling enforcement actions in Nevada and Washington to proceed. The court rejected both platforms’ claims that they would suffer irreparable harm if the cases proceeded, and found neither demonstrated a strong likelihood of success on appeal regarding their federal preemption arguments.
A multi-state legal pileup
Nevada filed a civil enforcement action against Kalshi in February 2026, arguing that the platform’s contracts, particularly those tied to sports outcomes, fall under state gaming rules rather than CFTC jurisdiction. That action followed a federal ruling on November 25, 2025, that gave Nevada the legal footing it needed to press forward.
Polymarket’s Nevada troubles started earlier, with the state taking action against the platform in January 2026. Polymarket had previously ceased operations due to regulatory issues in late 2025.
Washington’s Attorney General Nick Brown filed a lawsuit against Kalshi in late March 2026, centering the case on alleged violations of state anti-gambling laws.
At least nine other states have issued cease-and-desist letters or filed lawsuits against Kalshi and Polymarket. Arizona has gone furthest, pursuing criminal charges.
The preemption problem
Kalshi and Polymarket have argued their contracts are cleared through regulated exchanges, supervised by the CFTC, and structured as derivatives, and that federal law should therefore preempt state gambling statutes. State regulators, led by Nevada, view sports-related event contracts as functionally identical to sports betting, which is regulated at the state level.
The Ninth Circuit’s denial of the stays means the court did not find the platforms’ preemption arguments convincing enough to pause enforcement while the appeals play out.
What this means for investors and the prediction market industry
Kalshi and Polymarket now have to defend themselves in active state court proceedings while simultaneously pursuing their appeals. If state gambling regulators can assert jurisdiction over prediction markets despite CFTC oversight, these platforms face compliance requirements across states including Nevada, which may require a gaming license, Washington, which may ban certain contract types, and Arizona, which is pursuing criminal charges.
For traders using these platforms, market access could be disrupted in specific states if courts rule against the platforms, and sports-related contracts could be curtailed as platforms pull offerings that attract the most state-level scrutiny.