Kalshi, Polymarket Face Shutdown Risk in Nevada as Judge Allows State Regulator to Continue Pursuit of Temporary Restraining Order

BlockBeats News, March 3rd. On Monday, a U.S. federal judge ruled to remand the case brought by the Nevada state against the prediction market platforms Kalshi and its competitor Polymarket back to the state court, allowing state regulators to continue seeking a preliminary injunction. This decision raises the risk for both platforms to be forced to halt trading in Nevada.

The court found that the claims made by the Nevada Gaming Control Board are "state-law-based," and the Commodity Exchange Act (CEA) does not "completely preclude" the application of state gambling laws, thus the federal court lacks jurisdiction. Previously, both companies argued that the U.S. Commodity Futures Trading Commission (CFTC) has "exclusive jurisdiction" over the trading of the disputed event contracts.

If the state government successfully obtains the injunction, Kalshi may be prohibited from offering event contract products to Nevada users during the case. Legal analysts point out that this ruling represents a "significant setback" for Kalshi and could have a "domino effect," prompting more states to initiate similar litigation.

On the same day, the court also remanded the case against Polymarket's parent company Blockratize back to the state court. Polymarket has applied for an emergency stay to prepare for an appeal. Kalshi, on the other hand, may seek a temporary stay from the U.S. Supreme Court. The related applications may be submitted to U.S. Supreme Court Justice Elena Kagan, who is responsible for the Ninth Circuit.

Analysts believe that if more states follow Nevada in pursuing state-level injunctions, prediction market platforms will face a choice between compliance fragmentation or geographic blocking of certain states, which will weaken market liquidity.