Polymarket is taking legal action against Massachusetts to prevent the state from imposing restrictions on its sports prediction markets. This lawsuit emerges as regulators intensify their efforts, having already compelled Kalshi, a rival, to restrict access for Massachusetts users.
Legal Fight Looms as Polymarket Moves to Block Massachusetts Enforcement
Polymarket filed a lawsuit on Monday in the US District Court for the District of Massachusetts. The defendants include Attorney General Andrea Campbell and state gaming officials, according to Bloomberg Law. Polymarket asserts that Massachusetts lacks the authority to regulate or prohibit its contracts since the platform is governed by federal oversight. The suit argues that the Commodity Futures Trading Commission (CFTC) exclusively controls prediction markets under the Commodity Exchange Act, leaving no space for state gambling laws.
Polymarket contends that the risk of enforcement is imminent. The company highlights recent court decisions against Kalshi as evidence that it might face similar actions soon. Polymarket warns that such measures would disrupt its operations, fragment a national market into state-level segments, and force the company to either comply with what it considers unlawful state pressure or relinquish federally granted rights.
The key issue is the legal status of sports prediction contracts. Polymarket insists that these products function as financial instruments regulated by federal law, despite appearing similar to betting. The company claims that Congress empowered the CFTC to determine the permissibility of such contracts. Polymarket maintains that because the regulator has not prohibited them, they should be allowed nationwide.
Prediction Markets Hit Roadblocks as States Assert Gambling Authority
This case adds to a series of setbacks for prediction market platforms in Massachusetts. Last week, a state judge rejected Kalshi’s request to halt an earlier ruling requiring it to block Massachusetts users during its appeal. The court found Kalshi’s sports contracts subject to state gambling laws, necessitating a license to operate. It dismissed claims that federal oversight alone sufficed. In Nevada, a similar decision refused to protect Coinbase from state actions concerning similar products.
Thus far, Massachusetts courts have emphasized that Congress did not intend to override traditional state authority over gambling. Judges have characterized claims of federal preemption as overly broad and underscored the state’s interest in consumer protection and licensing enforcement.
Polymarket’s attorneys argue that enabling states to govern CFTC-supervised markets would undermine the concept of standardized national exchanges. The company seeks a court ruling that exempts its activities from state gambling laws and halts enforcement against its platform.
Publicly, Polymarket’s chief lawyer stated that the lawsuit is aimed at safeguarding users and ensuring the continuity of prediction markets. He noted that state crackdowns could stifle innovation. The case aligns with other legal actions that may influence the regulation of prediction markets nationwide. Massachusetts is becoming a pivotal battleground for the dispute over federal versus state authority.
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- Source: SCCGManagement.com