Kalshi, Polymarket fail to stop Nevada and Washington lawsuits

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Kalshi and Polymarket have failed to halt gambling lawsuits filed against them in Nevada and Washington, with both cases now moving forward and intensifying regulatory pressure on prediction market platforms operating in the United States.

The two prediction market operators attempted to stop the state-level legal actions but were unsuccessful, leaving them exposed to continued litigation from state regulators who classify their products as illegal gambling.

Nevada filed a complaint and won a preliminary injunction against Kalshi

Nevada’s Gaming Control Board filed a formal complaint against Kalshi, alleging that the platform’s event contracts constitute unlicensed gambling under state law. The state did not stop there.

A court subsequently granted a preliminary injunction against Kalshi, a significant procedural win for Nevada regulators. A preliminary injunction signals that the court found enough merit in the state’s claims to restrict the platform’s operations while the case proceeds.

Kalshi then sought relief at the federal appellate level. A Ninth Circuit docket entry shows the case was escalated, but the company’s efforts to obtain a stay were denied. As analysis from Mindcast AI detailed, the Ninth Circuit’s refusal to pause enforcement left Kalshi without a legal shield while the underlying case continues.

Washington sued Kalshi over illegal gambling claims

Separately, Washington State’s Attorney General filed suit against Kalshi, alleging the platform operates as an illegal gambling service within the state. The lawsuit adds a second front to Kalshi’s legal battle.

The fact that two states have independently pursued enforcement actions suggests that prediction market platforms face a convergent regulatory challenge. Nevada and Washington both treat event-based contracts as falling under their gambling statutes rather than accepting the platforms’ framing of these products as regulated financial instruments.

Polymarket faces parallel scrutiny in these jurisdictions. Neither company has succeeded in convincing courts to dismiss or pause the proceedings at this early stage, which means both must now prepare for full litigation on the merits.

Why the procedural losses matter for prediction markets

These are procedural setbacks, not final rulings on whether Kalshi or Polymarket actually violated state gambling laws. However, the inability to stop the cases early carries real consequences for the platforms and the broader prediction market industry.

When a court denies a motion to dismiss or refuses to stay enforcement, it signals that the plaintiff’s legal theory has enough weight to survive initial scrutiny. For Kalshi, the preliminary injunction in Nevada is particularly significant because it can restrict platform access and operations in that state during the litigation.

The cases also create uncertainty for users. Traders on prediction market platforms may face questions about whether their activity is legal in certain states, and the platforms themselves must weigh the cost of continued US market exposure against mounting legal fees and potential penalties. A state court previously denied a bid to suspend enforcement in a related proceeding, reinforcing the pattern of courts declining to intervene on behalf of these platforms.

For platforms like Polymarket that have significant crypto-native user bases, the state gambling classification poses an existential framing problem. If courts ultimately agree that event contracts are gambling products, these platforms would need state gaming licenses to operate legally.

What comes next as both cases advance

With stays denied and preliminary injunctions in place, the next phase will center on discovery, additional court filings, and potentially hearings on the merits. Nevada’s Gaming Control Board has already demonstrated willingness to pursue aggressive enforcement, and Washington’s Attorney General has shown similar resolve.

Kalshi and Polymarket will likely need to decide whether to continue fighting in court, seek settlements, or adjust their operations to comply with state gambling frameworks. Any operational changes, such as geofencing users in Nevada or Washington, would set a precedent that other states could use to demand similar compliance.

The US appeals court rejection of the stay request narrows the platforms’ options for near-term relief. Unless a higher court intervenes, both companies face a prolonged legal battle that could reshape how prediction markets operate across the United States.

Traders and industry observers should watch for the next scheduled court dates in both jurisdictions, any enforcement actions that follow the preliminary injunction in Nevada, and whether additional states file similar suits. These cases, alongside broader shifts in crypto market activity, underscore how rapidly the regulatory landscape is evolving for digital asset-adjacent platforms.

FAQ about the Kalshi and Polymarket lawsuits

Did Kalshi and Polymarket lose the cases?

Not yet. The courts denied their attempts to stop or pause the lawsuits, but no final ruling on the merits has been issued. The cases will proceed to further litigation, where the core question of whether these platforms constitute illegal gambling will be decided.

Why are Nevada and Washington involved?

Both states have gambling statutes that their regulators believe apply to prediction market contracts. Nevada’s Gaming Control Board and Washington’s Attorney General independently concluded that platforms like Kalshi are operating as unlicensed gambling services within their jurisdictions.

What happens next now that the lawsuits move forward?

The cases enter their next procedural phases, which will include discovery, additional filings, and hearings. In Nevada, a preliminary injunction is already in effect. The platforms must either defend against the claims in court, negotiate settlements, or modify their operations to address the states’ concerns.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.