BlockBeats News, February 19th. A recent federal lawsuit filed by Polymarket in Massachusetts may determine whether the regulatory jurisdiction of the U.S. prediction markets belongs at the federal or state level. Previously, the state court had issued a preliminary injunction against Polymarket’s competitor Kalshi, deeming its sports-related contracts as unauthorized sports betting. In the new lawsuit, Polymarket argues that Congress has granted exclusive regulatory authority over “event contracts” (prediction markets for sports, politics, etc.) to the Commodity Futures Trading Commission (CFTC), therefore the state government lacks the authority to independently prohibit or regulate these platforms, aiming to block potential enforcement actions by Massachusetts Attorney General Andrea Campbell.
The regulatory conflict between the U.S. federal government and the states is intensifying. Prediction market platforms claim that they fall under the CFTC-regulated derivatives market, allowing nationwide operations. However, states like Massachusetts and Nevada consider them a “sports betting loophole” to evade state gambling laws, leading to multiple lawsuits and injunctions. The outcome of Polymarket’s appeal could reshape the regulatory framework of U.S. prediction markets, determining whether these platforms can avoid restrictions under state gambling laws or must comply with varying state rules, potentially escalating to the U.S. Supreme Court.
