A federal judge on Monday sent legal disputes between Nevada regulators and prediction market platforms Kalshi and Polymarket back to state court, raising the risk that both platforms could be temporarily barred from offering event contracts to users in Nevada. The court found that the Nevada Gaming Control Board's claims "arise under state law" and that the Commodity Exchange Act (CEA) "does not completely preempt" those claims, undercutting the platforms' arguments for exclusive federal jurisdiction under the Commodity Futures Trading Commission (CFTC).
The court ruled it "lacks subject matter jurisdiction and will grant remand," according to documents reviewed by Decrypt. This decision allows Nevada regulators to seek an injunction against the CFTC-regulated exchanges in state court. Should Nevada secure injunctive relief, Kalshi could be temporarily barred from offering event contracts in the state while the case proceeds.
Legal analyst Daniel Wallach told Decrypt the remand order is a "significant setback for Kalshi because it puts the company one step closer to being pushed out of the Nevada market, which would represent the first state where Kalshi was forced to cease offering event contracts due to a court ruling." He warned this could have a "domino effect" on Kalshi's lawsuits with other state governments, making it harder for the company to argue that implementing geofencing technology would cause "irreparable harm."
In a parallel ruling the same day, the federal court also sent Nevada's case against Blockratize, Polymarket's parent company, back to state court, rejecting similar jurisdictional arguments. The court found Polymarket was not "acting under" the CFTC by running a regulated exchange and self-certifying contracts. Polymarket has since filed an emergency motion seeking a brief stay of the remand while it prepares an appeal.
Wallach explained that Kalshi's next step could be an emergency application to the U.S. Supreme Court, seeking a temporary stay while the Ninth Circuit considers its appeal. Any emergency application would go to Supreme Court Justice Elena Kagan, who oversees the Ninth Circuit.
The rulings come as prediction markets have seen rapid growth, with total trading volume rising to about $63.5 billion in 2025, up roughly fourfold from the previous year, according to blockchain security firm CertiK. While a 2024 federal ruling established that event contracts aren't inherently gambling under federal law, it did not "preempt state authority over gambling regulation."
CertiK argued that this distinction suggests "even if event contracts are permitted under federal derivatives law, states may still enforce their own regimes, potentially creating parallel layers of regulation." The firm warned that if a meaningful number of states take this approach, platforms face a choice between building state-by-state compliance infrastructure or geo-blocking restricted states, which "fragment liquidity" and undermine the core value proposition of prediction markets.
Former Interim CFTC Chair Caroline Pham said last month that the tensions between state gaming regulators and federally regulated prediction markets raise a constitutional question over federal and state authority, describing it as a 10th Amendment clash between derivatives oversight and states' traditional control over gambling. "I 100% think it's going to go to the Supreme Court," she said at a Stanford Blockchain Club panel.
