Nevada has launched a civil enforcement action against Blockratize, the corporate entity behind prediction market platform Polymarket, escalating a sector-wide battle over how such platforms should be classified under U.S. law.
At the heart of the dispute is a fundamental disagreement. State regulators are increasingly treating prediction markets as a form of gambling, while platforms like Polymarket and Kalshi argue their sports event contracts function as regulated financial products. Nevada’s move signals a more aggressive stance as states push back against a rapidly growing industry
Another hurdle for prediction market industry
A press release from the Nevada Gaming Control Board stated: “Nevada’s public policy, as expressed by the Legislature, is that 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.”
Blockratize did not immediately respond to a request for comment on the Nevada enforcement action.
Regulatory pressure on the sector is intensifying. It has faced several legal issues over recent months, with the recent rulings in Nevada and legal action from more than ten other states, the prediction market sector is facing a mounting number of obstacles as it aims to compete for a share of legal sports betting markets in the U.S.
Earlier this month, the state of Tennessee issued a cease-and-desist order to Kalshi from operating in the state. That decision has since been blocked by a US federal judge.
Arizona, Illinois, Montana, Maryland, Nevada, and Ohio have also moved to actively resist or effectively ban prediction market operations, while Connecticut, Massachusetts, Wisconsin, and New York are pursuing related legal or administrative actions against firms.
Kalshi, Polymarket announce record volumes
Despite the legal issues facing the sector, the popularity of prediction markets appears to be mushrooming. According to data compiled by Dune, a leading on-chain data platform for Web3, both Kalshi and Polymarket enjoyed week-over-week increases in notional volume to achieve new weekly all-time highs.
The increase in user numbers was driven by a huge slate of NFL action, according to analysts, with the Wildcard Weekend providing an incident-filled couple of days.
There was a combined notional volume approaching $6 billion across both Kalshi and Polymarket. For the week ending Jan. 18, Kalshi accounted for 35.9% of the market, compared with Polymarket’s 29.3%.
Customers at Polymarket and Kalshi are able to bet on sports via instruments labelled sport event contracts. They allow users to buy and sell positions based on the outcome of a specific sporting event. Unlike traditional sportsbooks, these contracts are traded on exchanges and settle at a fixed value once the event is decided.
Supporters say they function as derivatives, while critics argue they closely resemble sports wagering, which are subject to state-governed rules and regulations.
Sports betting data takes a hit
While Kalshi and Polymarket are thriving, recent figures out of New York make for worrying reading for legal sportsbooks and their backers. According to official data from the state, revenue from online sports wagering has plunged during the NFL playoff season, a time of year which typically attracts more interests from bettors than not.
That news comes off the back of stocks in DraftKings (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT) taking a sharp downturn.
Sports betting accounts for 52% of the revenue for DraftKings and 41% of the revenue for Flutter’s US segment. The increase in sports event contracts via prediction markets is having an adverse effect on the returns for some major players in the betting landscape.
Despite the recent poor results, the sports betting industry in New York remains in rude health. This month, the state posted a record $26.3 billion in annual sports betting wagers in 2025, up 15% from the previous year.
What is the next move for prediction markets?
Industry analysts say the diverging regulatory treatment of prediction markets and licensed sportsbooks is likely to remain a point of contention for state regulators and lawmakers. Several states have argued that sports event contracts blur the line between financial derivatives and gambling, raising concerns about consumer protections, taxation, and oversight.
As enforcement actions continue, the future of prediction markets in the U.S. may hinge on further court rulings or potential federal intervention to clarify how such platforms should be classified. Until then, the sector’s rapid growth is expected to keep it squarely in the crosshairs of regulators across the country.
