Polymarket Lawsuit May Influence U.S. Prediction Market Regulation

A recent federal lawsuit filed by Polymarket against the state of Massachusetts could determine whether U.S. prediction markets are regulated at the federal or state level. According to BlockBeats, this legal action follows a preliminary injunction issued by a Massachusetts court against Polymarket's competitor, Kalshi, classifying its sports-related contracts as unlicensed sports betting. In its new lawsuit, Polymarket argues that Congress has granted exclusive regulatory authority over 'event contracts'—such as those in sports and political prediction markets—to the U.S. Commodity Futures Trading Commission (CFTC). Therefore, state governments should not independently prohibit or regulate these platforms. The lawsuit aims to prevent potential enforcement actions by Massachusetts Attorney General Andrea Campbell. The regulatory conflict between the U.S. federal government and states is intensifying. Prediction market platforms claim they are derivatives markets regulated by the CFTC and can operate nationwide. However, states like Massachusetts and Nevada view them as exploiting loopholes in state gambling laws, leading to multiple lawsuits and injunctions. The outcome of Polymarket's appeal could reshape the regulatory framework for U.S. prediction markets, determining whether these platforms can avoid state-level gambling regulations or must comply with varying state rules. The case may ultimately reach the U.S. Supreme Court.