Polymarket Sues Massachusetts as Kalshi Faces Statewide Sports Markets Ban
As Kalshi blocks Massachusetts users, Polymarket is escalating the battle to the federal court, claiming state gambling laws can't touch CFTC-regulated prediction markets.
Polymarket has sued Massachusetts in federal court, arguing the state has no authority to block its prediction market platform — just days after regulators forced Kalshi to geofence residents from similar sports contracts. Massachusetts Attorney General Andrea Joy Campbell has already succeeded in stopping Kalshi from offering them in the state while its appeal remains pending.
Polymarket filed the lawsuit on Monday in the U.S. District Court for the District of Massachusetts. The company argues that federal law takes precedence over state gaming laws. It says the Commodity Futures Trading Commission (CFTC), through the Commodity Exchange Act (CEA), has exclusive authority to regulate those contracts.
Federal Preemption Argument
In the complaint, Polymarket describes sports prediction markets as federally regulated “swaps.” It argues that even if the contracts resemble gambling, Congress explicitly gave the CFTC the power to decide whether to allow or prohibit them. The CFTC has not banned these contracts, which the company says effectively permits their operation nationwide.
Polymarket also argues that federal law fully “occupies the field” of swaps and futures regulation, leaving no room for state intervention.
The filing warns that allowing Massachusetts to act could open the door for all 50 states to impose their own rules on federally approved exchanges, undermining what it calls Congress’s goal of maintaining uniform national markets.
The company is asking the court to declare that Massachusetts gambling laws are preempted by federal law. It also seeks an injunction preventing the state from enforcing those laws against Polymarket.
Neal Kumar, Polymarket’s Chief Legal Officer, said on X that the company is seeking clarity in federal court. “Congress gave the CFTC, not states, exclusive authority over event contracts,” he wrote.
“These are national markets with critical questions that must be resolved in federal court.”
He added that states attempting to shut down exchanges “will miss an amazing opportunity to help build markets for tomorrow.”
Kalshi Ordered to Block Massachusetts Residents
Polymarket’s filing comes just days after Kalshi lost its appeal against a statewide geofencing order in Massachusetts. On Feb. 6, a Massachusetts Superior Court judge ordered the company to geoblock Massachusetts users within 30 days while its appeal proceeds, as he had previously indicated.
The ruling upheld a Jan. 20 preliminary injunction, finding that Kalshi had been operating as an unlicensed sports betting provider under state law. The court also denied the company’s request for an emergency stay.
Judge Christopher Barry-Smith said Kalshi’s sports contracts are more akin to gambling than to financial trading. He ruled that federal oversight does not strip states of their authority to regulate gambling, rejecting Kalshi’s argument that CFTC supervision provides exclusive protection.
The judge added that the financial impact on Kalshi does not outweigh the state’s interest in enforcing its sports betting laws. He noted that Kalshi knowingly built a business model that conflicts with those laws.
Kalshi’s Appeal Fails
Attorney General Andrea Joy Campbell secured the court order on Jan. 20 after arguing that Kalshi lacked the required gaming license and failed to follow mandated consumer protection rules. According to the state, Kalshi allowed users as young as 18 to access the platform, despite Massachusetts setting a minimum age of 21 for sports betting.
As a result of the Feb. 6 decision, Massachusetts users can no longer open new sports-related positions. However, the court will allow existing contracts to settle.
Polymarket’s lawsuit adds another chapter to the growing clash between state regulators and prediction market platforms.
As courts continue to debate whether these contracts qualify as financial products or gambling, the Massachusetts fights could help determine whether prediction markets operate under a single federal framework or face a patchwork of state gambling laws across the U.S.
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