Polymarket filed a federal lawsuit on Monday against officials in Massachusetts, according to a Bloomberg Law report. This is part of a growing legal battle over whether states can control sports event prediction markets that companies say are under federal derivatives oversight. The complaint, filed in the US District Court for the District of Massachusetts, seeks to block potential enforcement action by Attorney General Andrea Campbell and state gaming regulators.
The company argues that Congress granted the Commodity Futures Trading Commission exclusive authority over event contracts, which prevents individual states from shutting down federally regulated markets. The filing warns that enforcement would cause “immediate and concrete” harm, disrupt operations, and fragment the company’s national market presence.
“Immediate judicial intervention is necessary to uphold Congress’ mandate, protect the federal market structure, and safeguard the rights of users nationwide,” Polymarket said in the complaint.
Chief Legal Officer Neal Kumar confirmed the legal action and framed it as a federal jurisdiction dispute.
“Racing to state court to try to shut down Polymarket US and other prediction markets doesn’t change federal law — and states like MA and NV that have done so will miss an amazing opportunity to help build markets for tomorrow,” Kumar said on X.
The lawsuit comes days after a Massachusetts state judge declined to pause a preliminary injunction against Kalshi, another prediction market operator, which must block state users from sports event contracts after a 30-day implementation period that ends 9 March. Attorney General Campbell previously sued Kalshi over allegations it operated as an unlicensed sportsbook.
Judge Christopher Barry-Smith wrote that some event contracts could fall under federal commodities regulation, but traditional state police powers such as gambling oversight remain intact. He said Kalshi relied on a business model that carried legal risk and should have anticipated a regulatory challenge.
Federal versus state authority at center of dispute
The legal conflict centers on the Commodity Exchange Act and the scope of CFTC oversight. Prediction market operators argue that event contracts qualify as derivatives under federal law. State regulators treat sports-related markets as gambling products that require licenses.
Polymarket cited CFTC Chairman Michael S. Selig’s January directive to reassess the agency’s role in litigation where jurisdiction questions arise. Selig said the commission has “the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives” and will pursue new rules that establish clear standards for event contracts.
The commission withdrew a previous proposal that sought to restrict sports and election betting. Selig said the agency would replace it with a new framework grounded in the Commodity Exchange Act and aligned with congressional intent.
Rulings across states create fragmented legal landscape
Courts across the United States have issued conflicting decisions that shape the dispute. A Nevada judge recently blocked Polymarket from offering sports contracts to users in the state, citing harm to the integrity of Nevada’s regulated betting framework. Earlier rulings in the same state shifted direction on Kalshi, first granting and later reversing an injunction tied to sports contracts.
A Maryland court denied Kalshi’s attempt to block enforcement actions, while a New Jersey judge granted a preliminary injunction in a separate case that continues on appeal. A California decision allowed Kalshi to operate on tribal land after a judge concluded the trades did not qualify as bets under federal gaming law.
Polymarket’s complaint references these decisions as evidence of inconsistent enforcement and growing legal risk. The company seeks injunctive relief to prevent civil penalties, criminal liability, and operational shutdowns within Massachusetts.
Rapid growth fuels scrutiny
Regulatory pressure has intensified alongside expansion in the sector. Prediction markets recorded $3.7 billion in trading volume during a single week in January, according to data from Dune. Separate figures from Messari show Polymarket and Kalshi with similar activity levels despite differences in infrastructure and business models.
At least eight states, including New York, Illinois, and Ohio, have taken steps to challenge or restrict sports-related event contracts. The legal pushback follows increased venture funding and rising valuations, with Polymarket and Kalshi valued in the billions after recent funding rounds.
The industry now faces a defining legal question over who holds authority to regulate event contracts tied to real-world outcomes. Polymarket’s lawsuit signals that operators intend to fight state actions in federal court rather than adapt to individual licensing regimes.
The case, QCX LLC v. Campbell, reflects a broader confrontation between federal derivatives law and state gambling frameworks. Courts continue to weigh the balance between national market access and local regulatory power, with further appeals likely. Multiple lawsuits involving prediction markets remain active across jurisdictions, and several legal observers expect the issue to reach the Supreme Court.
Gunel Ismayilova
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