Polymarket sues Massachusetts in growing state-federal fight over prediction markets

Polymarket has filed a federal lawsuit against Massachusetts as tensions rise between prediction market operators and state gaming regulators over who has the authority to oversee event-based contracts.

In a post Monday on X, Polymarket’s chief legal officer Neal Kumar said the company is suing Massachusetts in federal court, arguing that Congress granted exclusive authority over event contracts to the U.S. Commodity Futures Trading Commission rather than individual states.

“These are national markets with critical questions that must be resolved in federal court,” Kumar wrote, adding that efforts by states to shut down platforms offering prediction markets “doesn’t change federal law.”

The suit comes as states increasingly seek to treat sports-related prediction contracts as gambling products subject to local licensing and oversight.

Last month, a Massachusetts judge ruled that rival platform Kalshi cannot allow state residents to trade sports-event contracts without obtaining a state gaming license, agreeing with Attorney General Andrea Joy Campbell that such offerings amount to unlicensed sports wagering. The court later denied Kalshi’s request to pause the order while it appeals, giving the company 30 days to comply.

Massachusetts is just one of several states pushing back against prediction market platforms.

Nevada regulators have similarly moved against Kalshi, Polymarket, and partners offering sports-linked contracts, while Coinbase is also facing state litigation over similar event contract products.

Elsewhere, courts have delivered mixed outcomes. In January, a federal judge temporarily blocked Tennessee from enforcing a cease-and-desist order targeting Kalshi’s sports contracts while the court considers whether federal commodities law preempts state gambling rules.

Federal vs. state jurisdiction

Prediction market operators argue their contracts are federally regulated derivatives overseen by the CFTC and therefore fall outside state gambling laws. The legal fights now underway are expected to help determine whether states can restrict such markets or whether federal law preempts state gaming rules.

The dispute unfolds as federal policy shifts in a more industry-friendly direction. Earlier this month, the CFTC withdrew a Biden-era proposal that would have banned certain political event contracts and scrapped related guidance on sports-linked contracts.