Polymarket files lawsuit against the U.S. state of Massachusetts

As some U.S. state governments move to regulate prediction-market platforms as gambling, decentralized prediction-market platform Polymarket has filed a lawsuit against the state of Massachusetts.

According to The Block, a cryptocurrency-focused media outlet, on the 9th (local time), Polymarket filed suit alleging that Massachusetts has taken actions beyond its regulatory authority over prediction-market platforms, citing violations of federal law. Polymarket has mounted a legal challenge to the state government's attempt to classify and regulate its service as gambling.

Neil Kumar, Polymarket’s chief legal officer (CLO), said that “regulatory authority over event-based contracts lies with the U.S. Commodity Futures Trading Commission (CFTC) under federal law,” adding that “state governments cannot intervene in that area.” He argued that prediction markets are a form of derivatives and therefore fall under the federal regulatory framework.

The lawsuit was filed shortly after a Massachusetts court last month deemed sports event contracts offered by prediction-market operator Kalshi to be unlicensed gambling. The court ruled at the time that sports-related prediction contracts could not be offered without a state license.

After the ruling, as some state governments moved to bring prediction-market platforms under existing gambling regulatory regimes, the industry has broadly raised the possibility of a clash between federal and state regulation. Prediction-market operators maintain that they are not gambling businesses but derivatives platforms regulated at the federal level.

The outcome of the lawsuit is drawing market attention, as it could set a precedent that helps determine the legal standard for which authority will oversee prediction-market regulation in the United States going forward.