Polymarket hit with first lawsuit from Nevada gambling regulator
Prediction market operator Polymarket is facing its first major legal challenge in Nevada, as the state’s gaming regulator has sued to block the company from offering sports event contracts in the state.
The Nevada Gaming Control Board filed for a court order this week in Carson City district court, seeking an injunction to stop what it calls “unlicensed wagering” and asserting that sports-linked contracts fall under the state’s gambling laws.
It’s the latest filing in a long list of battles between state gambling regulatory bodies and prediction market platforms unfolding in US court systems.
Nevada is embroiled in a case against Polymarket rival Kalshi, in which a federal judge ruled in November that the state could enforce its cease-and-desist order on the platform. On 14 January, Kalshi’s appeal to the Ninth Circuit got some momentum after a judge granted Kalshi a partial stay.
In Nevada’s new case against Polymarket, state regulators argue that contracts tied to the outcomes of sporting events constitute wagering activity under state law, and companies must hold proper gaming licenses to operate such markets.
“The gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants and therefore must be licensed, controlled, and assisted to protect the public health, safety, morals, good order, and general welfare of the inhabitants of the State,” the regulator said in a statement.
Last week, Tennessee regulators issued cease-and-desist orders to Polymarket, Kalshi, and Crypto.com. A federal judge blocked the order, allowing Kalshi to continue operating in the state temporarily.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
Why Nevada’s regulators are escalating now
Nevada’s move against prediction markets has been building for months, shaped by a courtroom fight with Kalshi and growing concern from the state’s powerful casino lobby. In March, Kalshi sued the Nevada Gaming Control Board and the Nevada Gaming Commission after receiving a cease-and-desist letter, arguing its federally regulated event contracts are distinct from state-regulated sports bets. A federal judge later allowed the Nevada Resort Association to intervene, citing potential “considerable competitive disadvantage” for casino operators if prediction platforms can offer sports-linked markets without complying with Nevada’s strict rules on age limits and bet types.
The control board has also formalized its stance through public orders and filings. In early March, the agency issued a cease-and-desist order to Kalshi, making clear that tying contracts to sporting outcomes is sports wagering under state law and requires a Nevada license. The current case against Polymarket follows that playbook, with regulators arguing sports-linked contracts are gambling if offered to Nevadans without a state license. The board underscored the state’s interest in licensing and oversight to safeguard “public health, safety, morals [and] good order.”
The timing also reflects an unsettled regulatory map beyond Nevada. State actions have proliferated, with Tennessee issuing cease-and-desist notices to multiple platforms this month before a federal judge temporarily allowed Kalshi to continue operating there. The Nevada board, meanwhile, has set out a trail of filings, including a civil enforcement action aimed specifically at Polymarket’s sports markets in the state, detailed in a recent court submission.
Surging volumes forced prediction markets into the spotlight
Regulatory momentum is tracking a sharp rise in trading activity. In November, Kalshi and Polymarket hit a record $10 billion in combined monthly volume, according to The Block, powered by retail growth, product integrations and nonstop news catalysts. Kalshi led with $5.8 billion, while Polymarket climbed more than 23 percent month over month to exceed $3.7 billion. The two now command the vast majority of global prediction-market activity, bolstering what analysts call an emerging duopoly. Market-share data at The Block’s dashboard underscores that dominance.
Scale has brought scrutiny. As liquidity deepened and markets proliferated, regulators began parsing where event contracts end and sports betting begins, especially when platforms list outcomes tied to games, player performance or league results. Nevada’s position is that those contracts fall squarely within its sports wagering framework and can’t be offered in the state without a license, regardless of any federal permissions tied to event contracts. That distinction sits at the heart of the state’s clashes with Kalshi and Polymarket.
Capital has followed the growth, amplifying perceived competitive risk for licensed sportsbooks. Kalshi recently doubled its valuation to $11 billion after a $1 billion round, while Polymarket has struck distribution deals with Yahoo and Google Finance and moved to formalize its U.S. footprint. The Colombia regulator noted that the Commodity Futures Trading Commission gave Polymarket a green light for its U.S. launch through a no-action letter, and Australia reporting highlighted Polymarket’s purchase of a CFTC-licensed exchange, QCEX, for $112 million as it seeks regulated pathways.
Global regulators tighten the net
The debate is not confined to the United States. Australia’s communications regulator ordered internet service providers to block Polymarket in August after finding the site targeted local users in breach of the Interactive Gambling Act 2001. Inside the country’s broader enforcement sweep, Polymarket was one of four platforms added to the block list, taking the total to 1,296. The agency detailed the most recent actions on the ACMA website, citing the country’s gambling laws under the Interactive Gambling Act. Local media scrutiny also focused on influencer promotions tied to the 2025 federal election. Coverage of the ban emphasized Polymarket’s hybrid model combining crypto rails with event wagering, including sports and politics, which regulators say falls on the wrong side of the law for Australians.
Latin American authorities have moved in the same direction. Colombia’s regulator, Coljuegos, ordered ISPs to block access to Polymarket, saying its election-related markets constitute unauthorized games of luck and chance under Colombian rules. The agency framed the action as protecting a state monopoly and the legal industry’s funding of public health, noting the site-blocking order is part of a wider crackdown that has already targeted tens of thousands of illegal domains.
The U.S. fault line: federal permissions vs state sports laws
At issue is whether platforms can rely on CFTC oversight of event contracts to operate near or within sports markets that states consider gambling. Nevada has signaled the answer is no. The board’s sustained actions against Kalshi, including its March 4 cease-and-desist order, foreground the state’s position that sports-linked contracts require a gaming license and compliance with Nevada law. Industry coverage has framed the dispute as a broader test of jurisdiction between state gambling regulators and federally overseen prediction markets, with Front Office Sports noting how Polymarket is being drawn into the same Nevada dispute that has entangled Kalshi.
Other states are active, too. Tennessee’s orders to Kalshi, Polymarket and Crypto.com, and the short-term relief Kalshi secured in court, highlight a patchwork that can swing quickly with judicial rulings. As platforms expand, the risk of triggering state definitions of sports betting rises, particularly when contracts mirror the types of outcomes regulated sportsbooks offer.
Why casinos and consumers have a stake
Nevada’s resort industry views prediction markets as potential competitors that could siphon handle without adhering to the same compliance burdens. In moving to join the Kalshi suit, the Nevada Resort Association warned that a courtroom win for federally cleared platforms could put legacy operators at a disadvantage on rules ranging from the minimum betting age to the scope of permissible wagers. That argument aligns with the control board’s emphasis on a level regulatory field built around licensing, anti-money-laundering controls and integrity monitoring.
Consumer protection is also in focus. Ontario recently fined FanDuel Canada CA$350,000 for failing to promptly report suspicious table tennis bets connected to potential match fixing. The regulator said the operator missed multiple red flags and industry alerts before taking action. While a different jurisdiction and product set, the episode underscores why gaming regulators want tight oversight of markets tied to sports outcomes. For backers of Nevada’s approach, it is a case study in why event-based wagering that resembles sports betting should sit squarely within familiar compliance regimes.
What to watch next
Two timelines will shape what happens from here. First is the federal litigation over Kalshi’s operations in Nevada, which could influence how much room prediction markets have to operate alongside licensed sportsbooks. The Ninth Circuit has already granted Kalshi partial relief in a related appeal, creating uncertainty as arguments advance. Second is the state-level enforcement track, where Nevada has now shown it will pursue Polymarket and others if sports-linked contracts are offered to residents without a license, as laid out in the civil filing against Polymarket.
Platform strategy is evolving in tandem. Polymarket has been building a regulated foothold in the U.S., aided by a CFTC no-action letter referenced by Colombia’s regulator and a U.S. acquisition cited in the Australia enforcement story. Kalshi, flush with new capital, continues to expand product lines and volume. Whether those growth plans can coexist with state sports wagering frameworks—or must be carved away from sports entirely—will be decided in courtrooms and regulatory orders in the months ahead.
