Polymarket has filed a lawsuit against the state of Massachusetts, arguing that states cannot regulate prediction markets due to federal oversight. The lawsuit, filed on Monday in the U.S. District Court for the District of Massachusetts, escalates the legal battle over whether prediction markets fall under federal commodities law or state gambling rules.

The core of Polymarket's argument is that the Commodity Futures Trading Commission (CFTC) has exclusive authority over event contracts, including those offered on its platform. The company contends that federal law, specifically the Commodity Exchange Act (CEA), preempts state gaming laws, preventing Massachusetts from imposing its regulations. Polymarket warns that allowing individual states to regulate federally approved exchanges could undermine Congress's goal of maintaining uniform national markets.

This legal action follows Massachusetts regulators ordering Kalshi, a competing prediction market, to block residents from accessing sports-related contracts. Polymarket seeks a court declaration that Massachusetts gambling laws are preempted by federal law and an injunction preventing the state from enforcing those laws against Polymarket.

Neal Kumar, Polymarket's Chief Legal Officer, stated on X that Congress granted the CFTC exclusive authority over event contracts and that these national markets require resolution in federal court. He emphasized that state efforts to shut down prediction platforms do not alter the legal framework established by Congress and that prediction markets operate across state lines, necessitating consistent regulatory treatment.

Massachusetts' stance is that these platforms offer products resembling sports wagering and must comply with local gaming laws. In January, a Massachusetts judge ruled that Kalshi could not offer sports event contracts to residents without a gaming license, a decision the court upheld by rejecting Kalshi's request to delay enforcement while it appeals.

The lawsuit underscores the growing clash between state regulators and prediction market platforms. With courts debating whether these contracts qualify as financial products or gambling, the Massachusetts case could determine whether prediction markets operate under a single federal framework or face a patchwork of state gambling laws across the U.S.

Polymarket's lawsuit highlights a widening legal fight over whether such contracts fall under federal commodities law or state gambling rules. The outcome of this case could have significant implications for the future of prediction markets in the United States, potentially setting a precedent for how these platforms are regulated nationwide.