A three-judge panel of the Ninth Circuit denied emergency motions from prediction-market platforms Kalshi and Polymarket seeking to pause state gambling enforcement actions in Nevada and Washington, returning the cases to state courts. The orders were issued Thursday.
The court said that invoking a defense under the Commodity Exchange Act (CEA) does not automatically create federal-question jurisdiction that would transfer the suits out of state court. The panel characterized the CEA preemption claim as an affirmative defense that cannot, by itself, establish federal jurisdiction. The judges also rejected Polymarket’s contention that its compliance with CFTC oversight transformed its activities into actions taken under federal direction; showing compliance with federal law, the court said, does not prove the company was acting as a federal officer.
Nevada’s enforcement efforts accuse both platforms of operating without required state gaming licenses. Washington’s lawsuit challenges whether Kalshi’s sports-event contracts amount to illegal gambling products. The rulings leave those state-level claims to proceed in their respective courts.
The decision deepens an existing circuit split over how prediction-market contracts should be classified—whether as federally regulated swaps under the CEA or as gambling products subject to state gaming laws. Earlier rulings have diverged: the Third Circuit previously sided with Kalshi in a case that led to a preliminary injunction against New Jersey regulators, highlighting the inconsistent treatment across jurisdictions and increasing the likelihood the dispute could reach the Supreme Court for a final resolution.
The Ninth Circuit panel included Judges Ryan Nelson, Bridget Bade, and Kenneth Lee, all appointed during President Trump’s first term. On the same day as the ruling, Kalshi announced the launch of Americans for Fair Markets, an advocacy group aimed at countering efforts by gaming regulators opposed to prediction markets.
Kalshi, Polymarket, and the Washington attorney general did not immediately comment. Nevada’s gaming control board declined to comment, citing pending litigation.
The outcome underscores the continuing legal uncertainty facing prediction markets: firms argue federal derivatives law governs their contracts, while state regulators maintain their authority to enforce gaming laws unless Congress or the courts say otherwise. That unresolved tension will determine how, and where, future enforcement and regulatory questions are litigated.