Prediction market platform Polymarket filed a federal lawsuit Monday against Massachusetts regulators, seeking to block the state’s restrictions on its operations. The lawsuit comes as the state moves to ban rival platform Kalshi from offering sports prediction markets, setting the stage for a jurisdictional battle between state gambling laws and federal oversight.
This battle is crucial for prediction market platforms. During Super Bowl LX, prediction markets (including Kalshi and Robinhood) traded approximately $1.5 billion, almost matching traditional sports betting’s $1.76 billion. Kalshi alone has recorded a volume of over $500 million.
Trading volume during the Super Bowl Source: Kalshi
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Massachusetts moves to restrict sports prediction markets, but Polymarket fights back
The lawsuit follows a Massachusetts court order issued last week requiring Kalshi to geotag state residents to prevent them from accessing sports-related markets within 30 days. State regulators view these platforms as unlicensed sports betting operations under local jurisdiction rather than financial derivatives markets. Polymarket, which has strengthened its infrastructure with a native USDC integration with Circle, says state intervention usurps federal authority.
Today we filed a lawsuit in federal court against Massachusetts. Congress gave the CFTC, not the states, exclusive authority over event contracts.
These are national markets with critical questions that must be resolved in federal court 🧵
– Neal Kumar (@HereComesKumar) February 9, 2026
For months, the platforms claimed their offerings were event contracts subject to the Commodity Futures Trading Commission (CFTC), not state gaming commissions. This legal conflict has intensified as larger entities enter the space, with Crypto.com launching its own prediction market platform just as regulatory oversight is reaching its peak. Massachusetts Attorney General Andrea Campbell and state gambling regulators are named as defendants in the suit, which seeks to prevent enforcement actions that would force the platform to block local users.
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Federal authority versus state regulation
In the complaint filed in federal court, Polymarket claims that Massachusetts lacks the constitutional authority to regulate its platform. The company claims that Congress granted the CFTC exclusive leverage over event contracts, preempting state-level gaming classifications. This distinction is at the heart of the platform’s model, where users trade actions on outcomes ranging from political elections to Bitcoin price probabilities.
Neil Kumar, legal director of Polymarket, criticized the state’s approach in a public statement, emphasizing that markets act as information tools rather than casinos.
“Rushing through state courts to try to shut down Polymarket US and other prediction markets does not change federal law. States like MA and NV that have done this will miss an incredible opportunity to help build the markets of tomorrow. Ngress gave the CFTC, not the states, exclusive authority over event contracts.”
The filing argues that the State’s definition of gambling is too broad when applied to derivatives markets that provide economic utility, resulting in price discovery.
Possible effect on decentralized markets
Sports predictions are a key industry for Polymarket, and the outcome of this case could set a crucial precedent for prediction markets nationwide. If Massachusetts succeeds, other states like Nevada, which recently led the way in similar bans, could follow suit, potentially fragmenting the domestic market through mandatory geofencing. Conversely, a federal victory for Polymarket could solidify the CFTC’s role as the primary regulator of a booming industry.
The stakes are high as the industry expands beyond simple binary options, with decentralized exchanges like Hyperliquid supporting outcomes contracts. Market analysts are closely watching a possible framework announcement from the CFTC, following Chairman Michael Selig’s reported support for the usefulness of event-driven contracts.
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Neil is a professional cryptocurrency content writer with years of experience. He has written for various cryptocurrency websites to report on the latest news and has been hired by all kinds of cryptocurrency projects, to create content that would increase their visibility and attract more potential investors.
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