Add the watermelon, lime juice, and coconut sugar to the jar of a blender and blend until smooth, about 1 minute.
Pour the liquid into a shallow freezer-safe dish, cover, and place level in the freezer.
After 1 hour remove the watermelon mixture from the fridge and use a fork to scrap any ice that has formed. Replace the lid and return to the freezer.
After an additional 2 hours remove the watermelon mixture from the fridge and use a fork to scrap any ice that has formed. The slush should be done or just about done now (depending on your freezer and how thick the mixture was in the container). Serve if everything is uniformly icy or return the freezer and scrape with a fork one final time before serving. You may need to let the mixture sit at room temperature for a few minutes before re-scraping and serving.