A three-judge panel of the Ninth Circuit Court of Appeals on Thursday denied emergency motions from Kalshi and Polymarket to halt lower court rulings, sending gambling enforcement cases in Nevada and Washington back to state courts.
Federal Jurisdiction Defense Rejected
The judges ruled that raising a defense under the Commodity Exchange Act does not automatically create federal jurisdiction. "The CEA preemption defense is an affirmative defense, which cannot by itself give rise to federal question jurisdiction," the panel wrote. They also dismissed Polymarket's argument that compliance with CFTC oversight placed it under federal direction: "Polymarket's actions merely demonstrate its own compliance with federal law, which cannot alone show that it is acting under a federal officer."
State Cases at Issue
Nevada's lawsuits center on both platforms lacking state gaming licenses. Washington focuses on whether Kalshi's sports event contracts constitute illegal gambling products. Both states view the contracts as gambling, not regulated derivatives.
Growing Legal Divide
The ruling widens a split among federal courts. The Third Circuit previously sided with Kalshi, upholding a preliminary injunction against New Jersey gambling regulators. The conflict could eventually force Supreme Court review.
All three panel judges—Ryan Nelson, Bridget Bade, and Kenneth Lee—were appointed by President Trump during his first term. On the same day, Kalshi launched Americans for Fair Markets, an advocacy group to counter gaming industry lobbying. Kalshi, Polymarket, and Washington's attorney general did not respond to comment; Nevada's gaming control board declined, citing pending litigation.