The rise of prediction markets sparked a wave of legal challenges affecting most operators, including Kalshi and Robinhood. However, Polymarket, which received approval to relaunch in the U.S. last year, was never included. That changed last week when Nevada regulators acted on Friday.
Key Takeaways
- The Nevada Gaming Control Board sued Blockratize Inc., the entity behind Polymarket.
- The regulator argued that sports event contracts constitute wagering under Nevada law and require licensure.
- The action followed recent legal developments involving Kalshi.
The Nevada Gaming Control Board filed a civil enforcement action in Carson City District Court against Blockratize Inc., the corporate entity behind Polymarket. It seeks an order to stop the offering of what the regulator described as unlicensed wagering in the state.
The regulator stated that sports event contracts and certain other event-based contracts fall within Nevada’s definition of wagering and therefore require licensure.
It emphasized that gaming activity is closely regulated due to its economic significance to the state and its connection to public welfare considerations.
Last November, a judge reversed an earlier preliminary ruling and allowed Nevada to enforce a cease-and-desist order against Polymarket rival Kalshi’s sports event contracts. Kalshi has since appealed that decision to the Ninth Circuit, and enforcement has been paused pending the appeal.
Polymarket reentered the U.S. market last month after nearly four years of absence under a prior settlement with the Biden administration. In October, the company secured an investment of up to $2 billion from the parent company of the New York Stock Exchange.
Nevada’s lawsuit followed a Jan. 9 cease-and-desist order issued by Tennessee gambling regulators targeting Polymarket, Kalshi, and Crypto.com. Nevada has also issued orders against other companies offering prediction market products, including DraftKings and FanDuel, even though sports event contracts are not currently available on their Nevada platforms.
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Federal proposal targets insider trading risks in prediction markets
As state regulators continued to challenge prediction market offerings, federal lawmakers moved to address governance concerns tied to trading behavior. New York Rep. Ritchie Torres has introduced legislation aimed at limiting the participation of officials with access to sensitive government information.
The proposal seeks to prohibit elected officials, political appointees, and executive branch employees from trading contracts linked to government policy or political outcomes when their roles provide material nonpublic information.
Attention intensified after President Donald Trump confirmed that U.S. forces detained then-Venezuelan President Nicolas Maduro following overnight military strikes in Caracas. Trading records showed a Polymarket account created in late December placed roughly $32,500 across four contracts tied to U.S. intervention in Venezuela.
Those positions were entered when implied probabilities were in the low single digits and later resolved near $1 per share, producing profits exceeding $400,000 within a day.
The Wall Street Journal reported that prices began moving higher hours before the public announcement. That prompted speculation about the bettor having prior knowledge of the military action.
