Key Moments:
- The Nevada Gaming Control Board has filed its first civil enforcement lawsuit against Polymarket in the United States.
- Polymarket reentered the U.S. market in December 2025 after acquiring a CFTC-regulated exchange, but access for most U.S. users remains restricted.
- Ongoing legal disputes, including tax classification questions, persist for both Polymarket and Kalshi under differing regulatory approaches.
Nevada Pursues Legal Action Against Polymarket
The Nevada Gaming Control Board (NGCB) has initiated a civil enforcement lawsuit targeting prediction market platform Polymarket, marking the board’s first such case in the United States. The board requests a judicial declaration and injunction to prevent Polymarket from enabling unlicensed wagering, citing Nevada’s economic reliance on a strictly regulated gaming industry.
Central Arguments: Sports-Event Contracts Under Scrutiny
The core dispute centers on Polymarket’s contracts tied to sports outcomes. According to NGCB, these offerings constitute illegal gambling under state statutes NRS 463.0193 and 463.01962, which require operators to obtain a state gaming license for such activity.
Attorney Daniel Wallach, commenting on X, stated, “Polymarket will likely seek to remove this case to federal court, where it will end up before Nevada chief judge Andrew Gordon, who ruled against Kalshi, Robinhood and Crypto. PM would have to clear a higher bar — ‘complete preemption.’ In other words, automatic remand.” He further noted that Kalshi has pursued the less demanding “ordinary preemption” argument in its own legal challenges.
Regulatory Landscape Tightens Nationwide
The Nevada case comes amid broader regulatory crackdowns on prediction markets. In September 2025, Massachusetts sued Kalshi, alleging unauthorized sports betting through event contracts. Other states have issued cease-and-desist orders, with platforms such as Kalshi responding by initiating federal lawsuits.
Polymarket, after settling with the Commodity Futures Trading Commission (CFTC), exited the U.S. in 2022. It returned in December 2025 by acquiring QCEX, a CFTC-licensed exchange and clearinghouse. In July 2025, Polymarket received formal regulatory clearance for its operations.
Despite its CFTC approval, Polymarket has faced staunch opposition from Nevada regulators. The board prevailed against Kalshi in November 2025, though a judge subsequently reversed a preliminary injunction. Chief Judge Andrew Gordon’s decisions have generally supported state authorities, with Kalshi currently appealing at the Ninth Circuit Court.
Open Questions Around Taxes and Classification
Uncertainties remain over how prediction market losses will be categorized for federal tax purposes. Under the One Big Beautiful Bill Act (OBBBA), effective in 2026 under President Trump, deductions for gambling losses are capped at 90 percent of winnings. It is still unclear whether such market losses will be classified as gambling or investments under U.S. tax law.
Polymarket vs. Kalshi: Compliance Paths and Market Differences
Both Polymarket and Kalshi operate with CFTC supervision, but their compliance strategies differ. Kalshi has developed its compliance framework from inception and has yet to face federal enforcement actions. In contrast, Polymarket reentered the U.S. market by acquiring an established, regulated exchange, accelerating its approval but causing access limitations for most U.S. users since January.
Kalshi continues to maintain broader U.S. market access by leveraging its foundational compliance model, while both platforms remain entangled in state-led disputes regarding sports-related event contracts. Complicating matters, conflicting court decisions have contributed to a lack of legal clarity.
| Platform | Regulatory Status | Market Focus | Access for U.S. Users |
|---|---|---|---|
| Polymarket | CFTC approval via acquisition | Politics, breaking news, niche/crypto | Restricted (since January) |
| Kalshi | CFTC approval, in-house compliance | Sports, economic events | Consistent availability |
Looking Ahead
Polymarket and Kalshi continue to navigate complex regulatory and legal challenges as state and federal authorities intensify scrutiny of prediction markets. The evolving landscape presents ongoing risks and uncertainties for stakeholders and investors in this segment of the gaming industry.
- Author
Daniel Williams
