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Polymarket filed a federal lawsuit against Massachusetts Attorney General Andrea Joy Campbell on February 9, arguing that state officials lack authority to regulate prediction markets under federal law that grants exclusive jurisdiction to the U.S. Commodity Futures Trading Commission.
Polymarket argues that prediction contracts fall under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC) rather than state gaming regulators.
The legal move comes just days after a Massachusetts court ruling against rival platform Kalshi, which was ordered to halt certain sports-event contracts without a state license.
The outcome that Polymarket says creates an immediate enforcement risk for similar platforms.
“Congress gave the CFTC, not states, exclusive authority over event contracts.” Neal Kumar, Polymarket’s chief legal officer, said in a public statement.
Polymarket’s filing argues that any state-level attempt to shut down federally authorized event-contract markets would cause imminent and irreparable harm to its business and users nationwide.
The case represents more than a single enforcement dispute; it could determine how prediction markets, many of which use blockchain infrastructure, are classified within the U.S. financial system.
Massachusetts’ recent enforcement actions form the immediate backdrop for Polymarket’s lawsuit.
In late January and early February, a state judge ruled that Kalshi’s sports-event contracts likely constituted unlicensed wagering and required the company to comply with state gaming laws.
The court’s refusal to pause that order signalled that state regulators were prepared to treat prediction markets as gambling products rather than federally regulated financial instruments.
Kalshi was given a limited window to implement geofencing and prevent Massachusetts residents from accessing its sports-contract markets while litigation continues.
State officials have framed their actions as necessary to protect consumers and ensure compliance with established sports-betting rules.
“The court has made clear that any company that wants to be in the sports gaming business in Massachusetts must play by our rules no exceptions.” Attorney General Andrea Joy Campbell said after the Kalshi ruling.
That stance reflects broader concerns among state regulators that prediction-market platforms resemble sportsbooks but operate without licensing.
Polymarket’s legal strategy centres on the claim that its event-based contracts are derivatives governed by federal commodities law.
The company maintains that Congress granted the CFTC exclusive authority over such products under the Commodity Exchange Act.
Prediction markets allow traders to buy and sell contracts tied to real-world outcomes, such as election results or sports events, often using blockchain-based settlement systems.
Supporters argue that these markets provide valuable price discovery and risk-hedging tools, while critics contend that they function like gambling.
Legal experts say the jurisdictional conflict reflects a deeper, unresolved question.
Massachusetts is not the only jurisdiction challenging prediction-market operators.
Several states, including Nevada and Tennessee, have pursued enforcement actions or issued warnings related to sports- or event-based contracts.
Courts have delivered mixed results so far. In Nevada, regulators previously secured a favourable ruling against Polymarket.
While a federal judge in Tennessee temporarily blocked enforcement against another platform pending further review.
Industry participants warn that inconsistent state actions could fragment liquidity and undermine the development of nationwide event-contract markets.
Polymarket’s filing specifically argues that state enforcement would disrupt banking relationships, reduce market efficiency, and erode user confidence.
The broader legal struggle could eventually reach higher courts, potentially even the U.S. Supreme Court, as multiple companies, including Polymarket and Kalshi, are involved.
The outcome may determine whether prediction markets evolve into a recognised asset class within regulated derivatives trading or remain subject to fragmented, state-by-state enforcement.
