Polymarket has filed a lawsuit against the Massachusetts attorney general, aiming to block the state from restricting its prediction markets.
The lawsuit, submitted on Monday, preempts the state from shutting down its sports prediction contract markets, following the state’s preliminary win barring Kalshi’s sports wagers.
The move comes as U.S. authorities and courts increase scrutiny of platforms that allow users to trade on real-world events, particularly sports.
The lawsuit also follows Polymarket’s previous tussle with the state of Nevada whose authorities had filed lawsuits against the platform calling its prediction market offerings as “unlicensed betting”.
Polymarket defends its functionality
The prediction market argues that allowing individual states to impose restrictions would interfere with its ability to operate as a unified national platform.
The platform also emphasizes that these measures have the potential to divide its users across different jurisdictions, creating conflicting obligations. The requirements can also oblige Polymarket to balance federal regulatory demands with different regulations in individual states.
The firm maintains that its prediction markets are governed by federal oversight frameworks and should not be classified or regulated as local gambling products.
The platform aims to preserve a consistent regulatory environment and avoid operational disruptions that could arise from a patchwork of differing state restrictions by challenging the state’s actions.
Prediction markets clash with state authorities over regulation
The platform’s complaint mirrors broader concerns between rapidly expanding prediction markets and state authorities.
Polymarket’s Chief Legal Officer, Neal Kumar, stated on social media that the firm is battling “for the users.” He said that state politicians are rushing to stifle innovation while ignoring federal law.
He also stated that Massachusetts and Nevada risk passing up an opportunity to promote innovative market models that combine finance, data, and public forecasts. State officials have thus far declined to comment on the complaint.
The argument: Product or gambling?
Polymarket says its contracts should be regulated at the federal level by the CFTC, arguing they are financial products rather than gambling.
The company pointed to recent comments from CFTC Chairman Michael Selig about rethinking jurisdiction cases, as well as the agency’s involvement in a related Crypto.com lawsuit.
Meanwhile, Massachusetts courts have taken a stricter view, recently backing state gaming laws in a similar case involving Kalshi.
What happens next could change the way prediction markets work in the future. If Polymarket wins, it might stop states from cracking down on prediction markets, but if it loses, it could lead to more local bans and licensing rules.