Polymarket sues Massachusetts in growing state-federal fight over prediction markets

Decentralized prediction market platform Polymarket has filed a lawsuit against the Commonwealth of Massachusetts, seeking an injunction against state regulatory actions that threaten its operations within the state. The suit names Massachusetts Secretary of the Commonwealth William Galvin and the state’s Securities Division, challenging the division’s assertion that the platform’s contracts constitute illegal gambling and unregistered securities under state law.

Polymarket, a web3-native platform that allows users to wager cryptocurrency on the outcome of future real-world events—such as election results, economic metrics, or sporting outcomes—argues that the state’s enforcement actions are unconstitutional and preempted by existing federal regulatory frameworks. The company contends that its markets provide valuable informational and hedging tools, rather than merely facilitating illegal wagers.

This legal confrontation follows a period of intense regulatory scrutiny for prediction markets nationwide. Polymarket previously settled charges with the federal Commodity Futures Trading Commission (CFTC) in 2022, paying a fine but operating under the subsequent belief that its markets, when structured correctly, might fall outside the explicit jurisdiction of certain federal regulators. The company’s lawsuit argues that MA’s aggressive enforcement essentially voids the federal regulatory balance and infringes on interstate commerce.

State regulators in Massachusetts, long known for their proactive stance on investor protection and novel financial instruments, maintain that prediction market contracts are high-risk, unregistered products that violate state anti-gambling statutes and pose significant risks to retail investors. The outcome of this specific lawsuit is expected to have broad implications for the burgeoning industry, setting a potential precedent for whether state regulators can unilaterally ban or prosecute platforms already navigating complex federal regulatory agreements and guidance.

Source: Polymarket sues Massachusetts in growing state-federal fight over prediction markets