Opinion: The outcome of Polymarket's recent lawsuit will determine the regulatory oversight of US prediction markets

BlockBeats News, February 19th, Polymarket's recent federal lawsuit in Massachusetts may determine whether the U.S. prediction market's regulatory jurisdiction belongs at the federal or state level. Previously, the state court had issued a preliminary injunction against Polymarket's competitor Kalshi, ruling that its sports-related contracts constituted unlicensed sports betting. In the new lawsuit, Polymarket argues that Congress has granted exclusive regulatory authority over "event contracts" (prediction markets for sports, politics, etc.) to the U.S. Commodity Futures Trading Commission (CFTC), therefore, state governments do not have the authority to independently ban or regulate these platforms, aiming to block potential enforcement action by Massachusetts Attorney General Andrea Campbell.

The regulatory conflict between the U.S. federal government and states is intensifying. Prediction market platforms claim that they are derivatives markets regulated by the CFTC and can operate nationwide. However, several states such as Massachusetts and Nevada consider them a "sports betting loophole" to circumvent state gambling laws, leading to multiple lawsuits and injunctions. The outcome of Polymarket's appeal could reshape the regulatory framework of the U.S. prediction market, determining whether these platforms can evade state-level gambling regulations or must comply with different state rules. It may even escalate to the U.S. Supreme Court.

According to PolyBeats monitoring, the probability on Polymarket of predicting "U.S. Supreme Court to hear sports event contract-related cases by the end of July" has risen to 17%.