Web3 Gaming

Kalshi and Polymarket Lose Attempts to Block Gambling Lawsuits in Nevada and Washington

Prediction market platforms Kalshi and Polymarket suffered a major legal setback after courts denied their attempts to pause gambling-related enforcement actions in both Nevada and Washington state. The rulings intensify the growing battle over whether prediction markets should be treated as federally regulated financial products or as illegal sports betting and gambling operations. The decisions come during a period of explosive growth for prediction markets, which have rapidly expanded beyond politics into:

Sports
Economic forecasting
Crypto markets
IPO speculation
Real-world event trading.

At the center of the legal fight is a fundamental question. Are prediction markets financial derivatives—or gambling?

Nevada and Washington Are Challenging Sports Event Contracts

According to court filings, regulators in both Nevada and Washington argue that certain contracts offered by Kalshi and Polymarket closely resemble sports betting rather than legitimate financial products. Nevada regulators specifically targeted sports-related event contracts tied to:

Game outcomes
Tournament results
Sports performance markets.

Washington state officials similarly argued that some prediction contracts violate local gambling laws despite the platforms operating under broader federal commodity frameworks. Both companies attempted to halt the state-level actions while broader legal questions are resolved, but courts denied those requests, allowing enforcement proceedings to continue.

Kalshi Argues Prediction Markets Fall Under Federal Law

Kalshi has consistently argued that its markets are federally regulated derivatives overseen by the Commodity Futures Trading Commission (CFTC) rather than state gambling regulators. The company became the first federally regulated prediction market exchange approved by the CFTC in 2021. The platform maintains that event contracts tied to real-world outcomes function similarly to other commodity derivatives markets that help participants hedge risk and forecast future events.

Supporters of prediction markets argue these systems:

Improve information discovery
Aggregate market sentiment
Provide economic forecasting tools
Create alternative forms of financial analysis.

However, critics say many sports and entertainment contracts operate almost identically to traditional sportsbooks.

Polymarket Continues Facing U.S. Regulatory Pressure

Polymarket has faced increasing regulatory scrutiny in the United States for several years. In 2022, the platform reached a settlement with the CFTC over allegations it operated unregistered event-based binary options markets for U.S. users.

Despite geo-blocking U.S. users afterward, regulators and state authorities continue monitoring whether Americans are still accessing the platform through VPNs and alternative methods. The legal pressure has intensified as prediction markets increasingly expand into:

Sports
Elections
Corporate forecasting
Private company valuations
Geopolitical events.

Recent launches tied to OpenAI, SpaceX, and sports contracts have only increased attention from regulators.

Sports Leagues and Regulators Are Now Involved

The lawsuits also arrive during a broader push by regulators and sports organizations to establish oversight around prediction markets. Just this week, the CFTC announced a formal integrity agreement with the NHL designed to monitor suspicious activity tied to sports prediction markets. Similar agreements have already emerged with Major League Baseball.

That signals prediction markets are increasingly being treated like mainstream financial infrastructure requiring:

Surveillance systems
Anti-manipulation protections
Insider trading monitoring
Institutional oversight.

At the same time, state regulators continue arguing many of these products fall under local gambling laws regardless of federal commodity regulation.

The Legal Fight Could Shape the Entire Industry

The outcome of these cases could have massive implications for the future of prediction markets in the United States. If courts ultimately side with state regulators, platforms like Kalshi and Polymarket could face:

Geographic restrictions
Product limitations
State-by-state licensing requirements
Expanded gambling oversight.

If prediction markets prevail, however, it could strengthen the argument that event contracts belong under federal financial regulation rather than traditional gambling frameworks. That distinction could determine whether prediction markets evolve into:

A niche betting product
Or a major new category of financial infrastructure.

The Bigger Picture

The legal battles involving Kalshi and Polymarket highlight how rapidly prediction markets are colliding with traditional regulatory systems. What started as niche crypto-based event trading platforms are now evolving into large-scale markets tied to: