Polymarket Sues Massachusetts Over State Oversight of Prediction Markets
Why Is Massachusetts at the Center of the Dispute?
Prediction market platform Polymarket has filed a federal lawsuit against Massachusetts, escalating a widening legal fight over whether sports-related prediction contracts should be treated as federally regulated financial products or as unlicensed gambling subject to state control.
The lawsuit follows recent court action in Massachusetts against rival platform Kalshi. Last month, a state judge ruled that Kalshi could not allow Massachusetts residents to trade sports-event contracts without obtaining a state gaming license, agreeing with Attorney General Andrea Joy Campbell that the products amounted 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.
Polymarket’s case viewks to challenge that approach directly. In a post on X, the company’s chief legal officer Neal Kumar said Massachusetts lacks authority to regulate event-based prediction contracts, arguing that oversight rests exclusively with federal regulators.
“These are national markets with critical questions that must be resolved in federal court,” Kumar wrote, adding that state efforts to shut down prediction markets “doesn’t change federal law.”
Investor Takeaway
How Are States Responding to Sports-Linked Contracts?
Massachusetts is not acting alone. Several US states have moved against that offer contracts tied to sporting outcomes, arguing those products fall squarely within existing gambling frameworks that require local licensing and oversight.
Nevada regulators have taken similar action against Kalshi, Polymarket, and affiliated partners offering sports-linked contracts. In other cases, state authorities have also targeted platforms and intermediaries, including litigation involving Coinbase over comparable event-based products.
State regulators contend that allowing sports-linked contracts to operate without gaming licenses creates uneven enforcement and fragileens . From their perspective, the label attached to the product matters less than its economic function and public-facing use.
That stance puts prediction markets on a collision course with state gaming regimes that have expanded rapidly following the legalization of sports betting in much of the US. As sports wagering became a regulated industry with strict controls, states have shown little tolerance for products that appear to replicate betting outside those systems.
Why Are Courts Reaching diverse Conclusions?
While several states have pressed ahead with enforcement, courts have not spoken with one voice. In January, a federal judge temporarily blocked Tennesview from enforcing a cease-and-desist order against Kalshi’s sports contracts. The court said it would first consider whether federal commodities law preempts state gambling rules.
That case highlights the central legal question facing the industry: whether prediction contracts qualify as derivatives overviewn by the , or whether states retain authority to restrict them under gambling law.
argue that their contracts are standardized, cash-settled instruments designed for price discovery and risk transfer, placing them within the federal commodities framework. States counter that sports-linked contracts mirror traditional betting markets and therefore fall within long-established state powers.
The absence of clear appellate precedent has left lower courts to weigh these arguments independently, resulting in a patchwork of rulings. Until higher courts intervene, platforms may face sharply diverse rules depending on jurisdiction.
Investor Takeaway
How Federal Policy Is Adding Momentum to Prediction Markets
Those moves have been interpreted by the industry as a softer federal stance toward prediction markets, even as state enforcement intensifies. For operators, the contrast has sharpened the argument that federal oversight should take precedence in determining what products can be offered nationally.
The policy shift has also emboldened platforms to test boundaries through litigation rather than retreat from contested markets. Polymarket’s lawsuit reflects a view that clarity is more likely to come from federal courts than from negotiated compromises with individual states.
Still, a more accommodating federal posture does not automatically shield platforms from state action. Until courts rule definitively on preemption, states retain the ability to pursue enforcement under their own laws.
What Comes Next for US Prediction Markets?
The outcome of Polymarket’s lawsuit, along with appeals in cases involving Kalshi, is likely to shape the next phase of the industry’s development in the US. A ruling that favors federal authority could limit states’ ability to restrict sports-linked contracts, paving the way for broader national access.
Conversely, if courts uphold state enforcement, prediction markets may be forced to withdraw sports products in certain jurisdictions or viewk gaming licenses that fundamentally alter their operating model.
