Polymarket files lawsuit against Massachusetts over prediction market regulations

Polymarket has taken legal action against Massachusetts officials, seeking to block the state from restricting its prediction markets.

The move comes as U.S. regulators and courts step up scrutiny of platforms that allow users to trade on real-world events, especially in sports.

On Feb. 10, Polymarket filed a lawsuit in federal court against Massachusetts Attorney General Andrea Campbell and state gaming regulators. The company said the threat of enforcement is “immediate and concrete,” following a recent ruling against rival platform Kalshi.

According to Polymarket, state intervention would disrupt its national operations, fragment its user base, and force it to choose between federal compliance and state restrictions. The company argues that its markets fall under federal oversight and should not be treated as local gambling products.

Federal authority vs. state gambling laws

At the center of the case is a dispute over who has the right to regulate prediction markets.

Polymarket says its event contracts are governed by the Commodity Futures Trading Commission. Under federal law, the CFTC oversees derivatives and futures markets, including certain types of prediction products. The company claims this authority overrides state-level gambling rules.

In its complaint, Polymarket pointed to comments made on Jan. 29 by CFTC Chairman Michael Selig, who said the agency would re-assess how it handles cases testing its jurisdiction. Shortly after, the CFTC filed an amicus brief in a related lawsuit involving Crypto.com.

Massachusetts courts have taken a different view. Last week, a state judge refused to pause a ban on Kalshi’s sports contracts, ruling that the platform must follow state gaming laws. The judge said Congress did not intend federal regulation to replace traditional state powers over gambling.

Kalshi has appealed the decision but was denied a stay. The ruling requires the company to block Massachusetts users from sports markets within 30 days.A federal judge in Nevada also recently denied Coinbase’s request for protection from a similar enforcement action, adding to the legal pressure on prediction platforms.

Robinhood, which partners with Kalshi, is now seeking its own injunction in Massachusetts to avoid state licensing requirements.

Growing pressure on prediction platforms

Polymarket’s lawsuit reflects wider tensions between fast-growing prediction markets and state regulators.

In a statement posted on social media, Polymarket chief legal officer Neal Kumar said the company is fighting “for the users.” He argued that state officials are racing to shut down innovation and ignoring federal law.

He added that Massachusetts and Nevada risk missing an opportunity to support new market models that blend finance, data, and public forecasting. State officials have so far declined to comment on the lawsuit.

The case arrives as prediction markets gain mainstream attention. Jump Trading recently made investments in Polymarket and Kalshi, two platforms that have garnered institutional support. According to recent funding rounds, Polymarket is valued at approximately $9 billion. 

Supporters claim that by enabling users to trade on economic, sports, and election data, these markets enhance price discovery and public insight. Many contracts, according to critics, resemble unlicensed gambling and may put users at risk.

If Polymarket succeeds, it could limit the ability of states to regulate prediction markets and strengthen the CFTC’s role nationwide. A loss, however, may encourage more states to impose licensing rules or bans.