Polymarket Sues Massachusetts In Clash Over Federal Control Of Markets

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Polymarket says the CFTC has exclusive oversight over event-based prediction markets.
A Massachusetts court ruled Kalshi’s sports contracts are unlicensed gambling.
Tennessee court blocked local enforcement against Kalshi pending federal review.
The CFTC recently withdrew a proposed ban on political event contracts.

Polymarket has taken Massachusetts to federal court, arguing that only the U.S. Commodity Futures Trading Commission has the power to regulate event-based prediction markets. As state authorities label these platforms as unlicensed gambling, operators like Polymarket are pushing back, citing federal jurisdiction. This legal clash adds fuel to a growing national debate over whether prediction markets fall under financial regulation or state-controlled gambling laws.

Polymarket Files Federal Lawsuit Against Massachusetts

Polymarket has filed a lawsuit in federal court, challenging Massachusetts’ authority to regulate prediction markets. The company argues that only the U.S. Commodity Futures Trading Commission (CFTC) has the right to oversee these contracts, which involve forecasting the outcomes of real-world events.

Neal Kumar, Polymarket’s chief legal officer, said in a statement posted on X, “These are national markets with critical questions that must be resolved in federal court.” He added that efforts by states to ban prediction platforms “don’t change federal law.”

#Polymarket has taken legal action against Massachusetts officials, seeking to block the state from restricting its prediction markets.
— Cryptocurrency (@cryptocurrency) February 10, 2026

The legal action intensifies the growing dispute between state governments and prediction market operators, especially those offering contracts tied to sports events and politics.

State Courts Challenge Federal Oversight Claims

The legal conflict has grown as several states increase enforcement efforts. In January, a Massachusetts judge ruled that Kalshi, another prediction platform, must obtain a state gaming license to offer sports-related contracts. Attorney General Andrea Joy Campbell argued the contracts amounted to unlicensed sports betting.

The court denied Kalshi’s request to pause the ruling while it appeals. Kalshi was given 30 days to comply with the court’s order. Massachusetts joins other states such as Nevada in seeking to regulate these platforms under gambling laws.

Coinbase has also faced state lawsuits over similar event-based contracts, raising questions about how such products should be treated under both state and federal law.

Federal Policy Shifts Toward Market Operators

The lawsuit comes at a time when federal agencies are easing restrictions. The CFTC recently withdrew a proposal from the Biden administration that aimed to ban some political event contracts. The agency also removed related guidance affecting contracts linked to sports events.

These moves suggest the federal government is moving toward a more open stance on prediction markets. This shift has encouraged companies like Polymarket and Kalshi to continue expanding despite legal challenges from states.

Courts in some states have sided with the platforms. A federal judge in Tennessee temporarily blocked the state from enforcing a cease-and-desist order against Kalshi. The court will now consider whether federal commodities laws take priority over state gambling rules.

Jurisdictional Debate at the Core of Legal Dispute

The main issue in these lawsuits is whether event-based prediction markets are gambling or regulated financial products. Operators argue that contracts on future events are commodities and should be regulated by the CFTC under federal law.

State regulators argue otherwise. They claim that when these contracts relate to sports or political outcomes, they become gambling products that require state oversight and licenses.

The legal disputes across states are likely to play a key role in determining how prediction markets will be governed in the future. Courts are expected to clarify whether federal law overrides state restrictions, especially when it comes to new financial products tied to real-world events.