Prediction market Kalshi is once again staring down a possible restraining order in Nevada after a federal judge sent the dispute back to state court on Monday, allowing regulators to seek an injunction against the CFTC-regulated exchange.
The court found that the Nevada Gaming Control Board’s claims “arise under state law,” and that the Commodity Exchange Act “does not completely preempt” those claims.
It therefore “lacks subject matter jurisdiction and will grant remand,” sending the dispute back to the Nevada state court, according to court documents reviewed by Decrypt.
Should Nevada secure injunctive relief, Kalshi could be temporarily barred from offering event contracts to users in the state while the case proceeds.
"While not unexpected, the remand order is still 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,” Wallach told Decrypt.
This could have “a domino effect on Kalshi's lawsuits with other state governments because once Kalshi has to 'geofence' in one state, it becomes harder for Kalshi to argue in other cases that it would impose 'irreparable harm' on the company to implement geolocation technology,” Wallach added.
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 arguments on jurisdiction.
For Kalshi, the next step could be an emergency application to the U.S. Supreme Court seeking a temporary stay of the remand while the Ninth Circuit considers its appeal, Wallach explained.
“There is precedent for SCOTUS to issue a short administrative stay to preserve the status quo in order to enable the circuit court to rule on a pending stay motion. But without any guarantee on expedition from the Ninth Circuit, it might be a tough ask,” he said.
Any emergency application would go to Supreme Court Justice Elena Kagan, who oversees the Ninth Circuit and could decide the request herself or refer it to the full court, he added.
The rulings could "embolden other states" to sue Kalshi in state court and seek injunctions to block event contracts, a strategy that has so far succeeded in every case brought, Wallach said.
“States may soon begin to pursue this strategy with greater frequency,” he warned.
That distinction matters because it suggests that even if event contracts are permitted under federal derivatives law, states may still enforce their own regimes, potentially creating parallel layers of regulation, CertiK argued.
“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. Both fragment liquidity, which directly undermines the core value proposition of prediction markets,” the firm said.
“I 100% think it’s going to go to the Supreme Court,” she said, describing the matter as a 10th Amendment clash between derivatives oversight and states’ traditional control over gambling.
Decrypt has reached out to Kalshi, Polymarket, and the Nevada Gaming Control Board for comment.
