Ninth Circuit Rules Against Kalshi and Polymarket in State Gambling Suits

A federal appeals panel has dealt a setback to two leading prediction-market platforms, ruling they cannot dodge state gambling enforcement actions by trying to move the cases into federal court. What happened - A three-judge panel of the Ninth Circuit denied emergency motions from Kalshi and Polymarket on Thursday, refusing to block lower-court rulings that sent gambling enforcement cases in Nevada and Washington back to state courts. - The court held that invoking the Commodity Exchange Act (CEA) as a defense does not create federal-question jurisdiction. “The CEA preemption defense is an affirmative defense, which cannot by itself give rise to federal question jurisdiction,” the panel wrote. - The judges also rejected Polymarket’s argument that its compliance with CFTC oversight requirements meant it was acting under federal direction. “Polymarket’s actions merely demonstrate its own compliance with federal law, which cannot alone show that it is acting under a federal officer,” the opinion said. What the state cases allege - Nevada’s actions target both Kalshi and Polymarket over operating without state gaming licenses. - Washington’s suit focuses on whether Kalshi’s sports-event contracts amount to illegal gambling products under state law. Broader implications - The ruling deepens a split among federal courts over how prediction markets are regulated. Earlier, the Third Circuit sided with Kalshi by upholding a preliminary injunction against New Jersey regulators. That circuit split raises the prospect the issue could ultimately land before the U.S. Supreme Court. - The Ninth Circuit panel was composed of Judges Ryan Nelson, Bridget Bade and Kenneth Lee, all appointed during President Trump’s first term. Timing and reactions - The decision came the same day Kalshi launched Americans for Fair Markets, an advocacy group aiming to counter efforts by gaming interests to restrict prediction markets. - Kalshi, Polymarket and Washington’s attorney general did not immediately respond to requests for comment. Nevada’s gaming control board declined to comment, citing pending litigation. Why crypto and prediction-market watchers should care - The case concerns jurisdictional questions that affect how—and where—prediction markets and related crypto or derivatives products may be regulated and challenged. With courts divided, firms in the on-chain prediction and derivatives space face continued legal uncertainty until higher courts provide clearer guidance.