Polymarket has toughened its tone against US state regulators by filing a federal complaint against Massachusetts. The platform maintains that prediction markets fall exclusively under federal jurisdiction. In the background: the question of whether States can restrict event contracts already regulated on a national scale. The outcome could reshape how prediction markets work in the United States.
In brief
- Polymarket claims that the CFTC has sole authority over event contracts.
- The company wants to prevent Massachusetts from filing lawsuits against federally regulated markets.
- Massachusetts and Nevada have recently targeted sports contracts offered by platforms like Kalshi and Polymarket.
- Trading volume reached $3.7 billion in a week, while Polymarket and Kalshi valuations climb despite regulatory pressure.
Polymarket warns of the risk of fragmentation of the American market
In its complaint, Polymarket maintains that only Congress, via the CFTC, can regulate event contracts. Any attempt by a state to prohibit or limit these markets would run counter to the federal framework.
Neal Kumar, Polymarket's chief legal officer, confirmed the filing Monday, noting that these regulatory conflicts must be resolved at the national level. He criticized recent actions targeting Polymarket US and other similar platforms.
According to Neal Kumar, these initiatives have no impact on the federal rules in force and above all risk excluding states from the future development of prediction markets. He was referring here to recent measures taken by Massachusetts and Nevada.
According to a report from Bloomberg Law, Polymarket filed this complaint as a preemptive measure, in order to anticipate possible action by Massachusetts Attorney General Andrea Campbell. The company estimates thatsuch a procedure would interfere with the proper functioning of derivatives markets that are regulated at the federal level.
The United States toughens its tone on sports-related prediction markets
Pressure from local authorities increased after a series of legal decisions mainly targeting contracts relating to sporting events:
- Massachusetts courts issued a preliminary injunction preventing Kalshi from offering sports-related contracts.
- In Nevada, Polymarket was barred from in-state users for its sports-related contracts.
- The judges cited a risk of undermining the regulatory frameworks for sports betting, already well established at the local level.
These disputes have primarily targeted contracts backed by sporting events, but the regulatory wave no longer stops in Massachusetts and Nevada. Kalshi says at least eight states, including New York, Illinois and Ohio, have taken steps to restrict or challenge these types of markets. Regulators believe that these contracts are closely related to sports betting, an activity traditionally regulated at the state level.
Despite this tense context, thetrading activity literally exploded. According to Dune data, prediction markets saw a record $3.7 billion in a single week in January.
Messari data also shows that Polymarket and Kalshi display comparable volumes, with a notable difference in infrastructure: Polymarket is based on a decentralized system, while Kalshi is a centralized platform. The latest fundraising values Polymarket at $9 billion and Kalshi at $11 billion, proof that investors continue to believe in it, despite regulatory uncertainties.
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