Polymarket has moved to head off state-level restrictions by filing a federal lawsuit against Massachusetts officials, arguing that its prediction markets fall under national oversight rather than local gambling laws.
The complaint names Massachusetts Attorney General Andrea Campbell and state gaming regulators.
Polymarket says the risk of enforcement is immediate after a recent court ruling against rival Kalshi, and warns that state intervention would disrupt its nationwide operations and split its user base.
The case lands as US regulators and courts intensify scrutiny of platforms that let users trade on real-world events, particularly sports.
Polymarket argues it should not be forced to choose between complying with federal rules and navigating a patchwork of state restrictions.
Jurisdiction clash
At the core of the lawsuit is who has the authority to regulate prediction markets.
Polymarket maintains that its event contracts are overseen by the Commodity Futures Trading Commission, which supervises derivatives and certain prediction products under federal law.
The company says this authority supersedes state gambling statutes that treat the markets as local betting.
Polymarket’s filing references comments made on Jan. 29 by Michael Selig, the Commodity Futures Trading Commission chair, who said the agency would reassess how it handles cases that test the limits of its jurisdiction.
Soon after, the CFTC submitted an amicus brief in a related lawsuit involving Crypto.com, signalling a more active stance in disputes over regulatory reach.
Courts push back
Massachusetts courts have taken a narrower view of federal preemption. Last week, a state judge refused to pause a ban on Kalshi’s sports contracts, ruling that the platform must comply with state gaming laws.
The court said Congress did not intend federal oversight to displace long-standing state powers over gambling.
Kalshi appealed but was denied a stay and must block Massachusetts users from sports markets within 30 days.
Legal pressure is building elsewhere. A federal judge in Nevada recently rejected Coinbase’s request for protection from a similar enforcement action.
Robinhood, which partners with Kalshi, is now seeking its own injunction in Massachusetts to avoid state licensing requirements.
Industry stakes
Polymarket’s lawsuit highlights broader tension between rapidly expanding prediction markets and state regulators.
In a social media post, the company’s chief legal officer said the case is being fought on behalf of users and accused states of moving to curb innovation while ignoring federal law.
The dispute arises as prediction markets attract institutional backing.
Jump Trading has invested in both Polymarket and Kalshi. Polymarket has been valued at about $9 billion in recent funding rounds.
Supporters say trading on economic, sports, and election data can sharpen price discovery and public forecasting.
Critics counter that many contracts resemble unlicensed gambling and could expose users to risks.
If Polymarket prevails, the ruling could constrain states’ ability to regulate prediction markets and reinforce the CFTC’s role nationwide.
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