Polymarket U.S. appears to have withdrawn from Nevada after a court issued a preliminary injunction blocking it from doing business in the state late on Friday.
The Nevada Gaming Control Board (NGCB) sued Polymarket U.S. in the First Judicial Court for the State of Nevada, a state court, in January, arguing the prediction market is breaking the state’s wagering laws. It was the first major lawsuit between state authorities and Polymarket since its return to the U.S. in July of last year.
The suit concerns Polymarket’s U.S. site, which is currently invitation-only and focused on sports. Polymarket’s global site already blocks users with U.S. IP addresses from making trades.
Judge cites past decisions
Like in previous prediction market litigations, the lawsuit hinged on the question of whether the federal Commodity Exchange Act (CEA), which governs regulated prediction markets, can supersede, or preempt, state gambling laws. Polymarket argues it does, while the NGCB argues that these laws still apply.
The judge, Jason Woodbury, pointed to decisions in federal lawsuits concerning other prediction markets to explain his decision. “The balance of convincing legal authority weighs against federal preemption in this context,” he wrote.
In November, the U.S. District Court for the District of Nevada denied Crypto.com an injunction that would have let the business keep operating in the state. The judge in that case, Andrew Gordon, determined that sports event contracts did not meet the definition of a “swap” as laid out in the CEA, and therefore even if the CEA did preempt state gambling laws when it came to traditional swaps, that preemption did not apply to sports contracts. Gordon later used the same reasoning to dissolve an injunction he had previously granted to Kalshi.
The CEA defines a swap as “any agreement, contract, or transaction … that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.”
Citing four dictionaries, Judge Gordon argued that “occurrence” in this context refers to whether an event happens, but not on details of how it happens, such as who wins a sporting event.
Judge Woodbury described this argument as “persuasive.”
He also pointed to the decision in Kalshi’s federal lawsuit against the state of Maryland, where the prediction market was denied an injunction, because the judge ruled that the CEA does not preempt state gambling laws.
Judge says NGCB, not Polymarket, faces irreparable harm
Beyond the merits of the case, the judge considered the balance of hardships in issuing or denying a temporary restraining order. He determined that if Polymarket was ultimately ruled to be unlawful, but was still allowed to operate in the state, “immediate, irreparable” harm would be caused to Nevada’s regulatory structure, which would be “not sufficiently remediable by compensatory damages.”
On the other hand, if the business was ruled to be lawful, but Woodbury issued the TRO, any harms caused would primarily be monetary and the business could therefore simply be compensated for them.
As a result, he said, “The balance of hardships and public interest in maintaining meaningful control over Nevada’s gaming industry for the purpose of ensuring its integrity supports issuance of the temporary restraining order.”
Posts on social media indicate the platform, which is available in the U.S. only to users who have been rolled off a waitlist, has blocked access in Nevada.
“Polymarket is challenging this temporary order in court,” the message says. “We love building with you and we hope to continue doing so in the near future. We’re committed to seeing this through and to reopening as soon as we’re allowed to do so.”
Polymarket can challenge the decision to issue a TRO by filing an opposition motion within the First Judicial Court, but it cannot appeal the decision to a higher court.
The TRO will last long enough for the court to decide whether to issue a preliminary injunction, which would also block Polymarket from the state. Unlike a TRO, a preliminary injunction can last until the court makes a final judgment on the case. Like a TRO, a decision on a preliminary injunction depends on the likelihood of winning the case on the merits, potential harms from issuing or denying the order, and the public interest. Preliminary injunctions can be appealed in the Nevada Court of Appeals or the Supreme Court of Nevada.
