BlockBeats report, on February 19, a recent federal lawsuit filed by Polymarket against Massachusetts may determine whether regulation of prediction markets in the U.S. falls under federal or state jurisdiction. Previously, a state court issued a preliminary injunction against Polymarket’s competitor Kalshi, ruling that its sports-related contracts constitute unlicensed sports betting. In its new lawsuit, Polymarket argues that Congress has granted the Commodity Futures Trading Commission (CFTC) exclusive regulatory authority over "event contracts" (prediction markets for sports, politics, etc.), meaning state governments have no authority to independently ban or regulate these platforms. The goal is to prevent potential enforcement actions by Massachusetts Attorney General Andrea Campbell.
Regulatory conflicts between the U.S. federal government and individual states are intensifying, as prediction market platforms claim they are regulated by the CFTC as derivatives markets and may operate nationwide; however, multiple states, including Massachusetts and Nevada, view them as exploiting a “sports betting loophole” to circumvent state gambling laws, and have launched numerous lawsuits and injunctions. The outcome of Polymarket’s appeal could reshape the regulatory framework for prediction markets in the United States, determining whether these platforms can be exempt from state gambling regulations or must comply with varying state rules—and may ultimately reach the U.S. Supreme Court.