Whether Polymarket can offer its services in Nevada will now be up to the courts.
The Nevada Gaming Control Board recently announced its filing of a civil enforcement action against Polymarket in state court, marking the first lawsuit filed against the prediction market in the United States. The Board’s complaint seeks a “declaration and injunction to stop Polymarket from offering unlicensed wagering in violation of Nevada law.”
Notably, the lawsuit is not specific to Polymarket’s offering of sports-related event contracts, as the notice states “[t]he Board considers sports event contracts, or certain other event contracts to constitute wagering activity” under state law.
Alleged Polymarket violations
Per the notice, Polymarket’s event contracts allegedly violate the following laws:
- NRS 463.160 – prohibits the unlicensed offering of: (i) any gambling game, gaming device, slot machine, race book, or sports pool; or (ii) any interactive gaming system.
- NRS 463.350 – prohibits individuals under the age of 21 from placing wagers at, or collecting winnings from, any gambling game, slot machine, race book, sports pool, or pari-mutuel operator.
- NRS 465.086 – prohibits receipt of compensation or other monies in exchange for accepting any bet or wager upon the result of any event held at a track involving a horse or other animal, sporting event, or other event, without having first obtained necessary gaming license(s).
- NRS 465.092 – prohibits operators or individuals from accepting wagers from any person physically located in Nevada unless licensed to do so in accordance with Nevada law.
Removal to federal court next?
Polymarket will likely respond with a motion to remove the Board’s lawsuit to federal court with the District Court of Nevada, where Kalshi, Crypto.com, and Robinhood have filed cases arguing that state law is preempted by the federal Commodities Exchange Act and therefore does not apply to Commodity Futures Trading Commission-regulated exchanges.
Kalshi initially obtained a preliminary injunction against the Nevada Gaming Control Board on such basis, which was later overturned following the court’s denial of a similar motion filed by Crypto.com.
Removal to federal court is proper when the district court has original jurisdiction, i.e., the subject matter of the case is based upon a “federal question.” This can be demonstrated by showing either:
- The cause of action is based on a federal law or statute. This is the basis of Kalshi’s “Supremacy Clause” claim filed in numerous federal courts; or
- The cause of action is based on a “substantial federal question.” This allows federal jurisdiction to be asserted over a state law claim where the federal issue is: “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”
As numerous related cases already exist in federal court, Polymarket will likely look to join Kalshi and Crypto.com in the District Court of Nevada in hopes of defeating the state regulator’s claims.
NGCB issues notice to licensees
The NGCB’s civil enforcement action was filed on the same day it provided its “Industry Guidance for Online Gaming Protocols,” seeking “to reduce potential adverse consequences for Licensees and Applicants” under the Board’s foreign gaming requirements and Nevada’s gaming laws.
The guidance requires licensees to complete “full and proper due diligence” of applicable laws and regulations before offering online gaming products in another jurisdiction, and those currently offering online gaming products outside Nevada “are expected to provide the Board with a current and complete list of all such Jurisdictions known to a Licensee within 60 days of the date of the posting of this Guidance on the NGCB website.”
