Ninth Circuit denies Kalshi and Polymarket preemption shield as House opens insider-trading probe
The Ninth Circuit rejected bids by Kalshi and Polymarket to halt state gambling enforcement actions in Nevada and Washington on May 22, ruling that federal derivatives oversight does not shield prediction market firms from state gaming laws. The same day, House Oversight Chairman James Comer opened a congressional probe into alleged insider trading on both platforms, sending letters to their CEOs with a June 5 document deadline. The investigation examines whether users, including government employees, trade with non-public information on legislative or regulatory decisions. The dual developments leave both the CFTC-regulated exchange and the crypto-native platform exposed to simultaneous state enforcement and congressional scrutiny on separate coasts.
Kalshi and Polymarket now face simultaneous state enforcement in Nevada and Washington and a June 5 congressional document deadline, stripping away the federal-preemption defense they have relied on in Ohio, Wisconsin, and Minnesota litigation. Any materials produced for Comer become discoverable evidence in those parallel state proceedings.
Joins the CFTC's preemption lawsuits in Ohio, Wisconsin, and Minnesota as the fourth front where Kalshi and Polymarket must defend their operations without federal shield protection.