On Feb. 10, Polymarket filed a lawsuit in federal court against Massachusetts Attorney General Andrea Campbell and state gaming regulators, seeking to block the state from restricting its prediction markets. The company said the threat of enforcement is “immediate and concrete,” following a recent ruling against rival platform Kalshi.
The core argument: Polymarket's event contracts fall under the Commodity Futures Trading Commission (CFTC) purview. Federal law governing derivatives and futures should override state-level gambling rules. State intervention, the company claims, would disrupt national operations, fragment its user base, and force it to choose between federal compliance and state restrictions.
Kalshi Ruling as Trigger
The lawsuit was sparked by a Massachusetts state judge's refusal last week to pause a ban on Kalshi's sports contracts. The judge ruled that Kalshi must follow state gaming laws, saying Congress did not intend federal regulation to replace traditional state powers over gambling. Kalshi appealed but was denied a stay, now required to block Massachusetts users from sports markets within 30 days.
A federal judge in Nevada also recently denied Coinbase's request for protection from similar enforcement. Robinhood, which partners with Kalshi, is seeking its own injunction in Massachusetts to avoid state licensing requirements. These parallel cases intensify legal pressure on prediction platforms.
CFTC vs. State Courts
Polymarket's complaint cites CFTC Chairman Michael Selig's Jan. 29 remarks that the agency would reassess how it handles jurisdiction-testing cases. The CFTC later filed an amicus brief in a related lawsuit involving Crypto.com, signaling federal intent to assert authority.
Massachusetts courts have taken a different view. The Kalshi decision explicitly stated that Congress did not grant the CFTC exclusive power to preempt state gambling regulation. The central legal question: Can federal agency interpretation override explicit state statutes?
Polymarket's $9B Valuation
The case arrives as prediction markets gain mainstream attention. Jump Trading invested in both Polymarket and Kalshi. According to recent funding rounds, Polymarket is valued at approximately $9 billion. Chief Legal Officer Neal Kumar posted on social media that the company is fighting “for the users,” accusing state officials of racing to shut down innovation while ignoring federal law.
He added that Massachusetts and Nevada risk missing an opportunity to support new market models blending finance, data, and public forecasting. State officials declined to comment on the lawsuit.
What's at Stake
Supporters claim prediction markets enhance price discovery and public insight by letting users trade on economic, sports, and election data. Critics say many contracts resemble unlicensed gambling and may put users at risk.
If Polymarket succeeds, it could limit states' ability to regulate prediction markets and strengthen the CFTC's nationwide role. A loss may encourage more states to impose licensing rules or bans. The ruling will determine whether U.S. prediction markets operate under federal uniformity or face fragmented state crackdowns.