Polymarket filed a federal lawsuit against the state of Massachusetts, arguing that Congress granted the Commodity Futures Trading Commission (CFTC) exclusive authority over event contracts, preventing states from independently shutting down federally regulated prediction markets.

Neal Kumar, Polymarket’s chief legal officer, confirmed the lawsuit on Monday, saying the dispute involves national markets and unresolved legal questions that must be addressed at the federal, not state, level.

“Racing to state court to try to shut down Polymarket US and other prediction markets doesn’t change federal law — and states like MA and NV that have done so will miss an amazing opportunity to help build markets for tomorrow,” Kumar said, referring to Massachusetts and Nevada. 

Source: Neal Kumar

As reported by Bloomberg Law, the lawsuit was filed preemptively to block potential enforcement action by Massachusetts Attorney General Andrea Campbell, which Polymarket argues would unlawfully interfere with federally regulated derivatives markets.

The legal challenge follows a recent state court ruling in Massachusetts that granted a preliminary injunction barring Kalshi, another prediction market, from offering contracts on sports-related events in the state.

The move also comes one week after a Nevada judge blocked Polymarket from offering sports contracts to users in the state, citing “irreparable” harm to Nevada’s ability to maintain the integrity of its sports betting regulatory framework, according to Cointelegraph.

An excerpt of Polymarket’s lawsuit filed in the United States District Court for the District of Massachusetts.  Source: Pacer

Related: Jump Trading eyes Kalshi, Polymarket stakes as institutional interest grows: Report

Prediction markets face growing state scrutiny as volumes surge

As Cointelegraph has reported, Massachusetts and Nevada are not the only states pushing back against prediction markets. At least eight others, including New York, Illinois and Ohio, have taken steps to restrict or challenge sports-related prediction markets, according to Kalshi.

The regulatory pushback comes even as prediction markets have seen rapid growth in recent months. Data from Dune shows that prediction markets recorded $3.7 billion in trading volume during a single week in January, marking a new high.

Separate data from Messari indicates that Polymarket and Kalshi are currently neck and neck in trading volume, despite operating under different models, with Polymarket running on decentralized infrastructure.

As of October, Polymarket and Kalshi had nearly identical trading volume. Source: Messari

Both companies have secured significant venture financing, with Polymarket valued at $9 billion and Kalshi at $11 billion following their most recent funding rounds.

Related: DraftKings eyes crypto offerings as it expands into prediction markets

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