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Efforts by state regulators to restrict or challenge prediction market operators have broadened the conflict over sports-event contracts. What began as isolated disputes has evolved into a multistate, multi-operator battle with no clear end in sight.
Massachusetts, Nevada, and Connecticut have either sued, taken enforcement action, or openly questioned the legitimacy of contracts for sports-based events. Meanwhile, legislators in states such as New York, Illinois, and Ohio have begun examining how these marketplaces should be regulated.
At the center of the dispute is a fundamental question: Are sports prediction contracts financial instruments governed by federal law, or do they constitute sports betting subject to state gaming regulation?
Polymarket v. Campbell: The MA lawsuit
Polymarket filed a federal lawsuit in Massachusetts against Attorney General Andrea Joy Campbell and state authorities to block what it termed an “imminent enforcement action.”
The platform maintains that its event contracts fall under the Commodity Exchange Act and are therefore regulated exclusively by the US Commodity Futures Trading Commission (CFTC). Polymarket argues that Congress granted the CFTC sole authority over such contracts, which prevents states from applying gambling laws to those products.
In contrast, Massachusetts regulators insist that contracts based on the outcome of sporting events are akin to traditional sports betting and must comply with state licensing requirements. With the matter now in court, the outcome could clarify whether state gaming laws can override federally overseen event contracts.
Nevada’s civil complaint against Polymarket
Nevada regulators have asserted that providing contracts for sports events without a state gaming license is illegal. The Nevada Gaming Control Board has taken steps to halt such activity within the state.
Nevada has long maintained a strictly regulated gaming system, and its economy depends on licensed sportsbooks. Consequently, state regulators have shown minimal tolerance for platforms they believe operate outside that framework. The state recently filed a lawsuit against Polymarket over its sports-event contracts.
Kalshi’s fight for Connecticut access
Connecticut has also entered the fray. State officials ordered prediction market operators to cease activities, asserting that sports-based contracts fall under state gaming laws.
In response, operator Kalshi questioned Connecticut’s position, arguing that federal law takes precedence. Kalshi filed a lawsuit against the Connecticut Department of Consumer Protection on Dec. 6, 2025. On Dec. 10, 2025, the company secured a two-month delay before the cease-and-desist order takes effect. The outlook remains unclear once that window closes.
New York, Illinois and Ohio regulatory scrutiny
Lawmakers in New York, Illinois, and Ohio have begun debating how prediction markets should be classified while also pursuing formal legal action. Views differ on whether sports-related contracts should fall under existing gambling frameworks.
Some legislators argue that event contracts are financial instruments subject to federal oversight. The growing mix of legislative proposals and enforcement efforts highlights the legal uncertainty surrounding the industry.
The Supremacy Clause showdown
Industry leaders argue their platforms function more like stock markets than sportsbooks. Users buy and sell contracts linked to real-world outcomes, such as elections, economic indices, and sports results.
Proponents argue that national markets require national oversight, claiming that a patchwork of state rules will stifle market liquidity. Conversely, state officials contend that sports-event contracts are functional equivalents to traditional wagers and fall entirely under state jurisdiction.
Will the CFTC intervene in state litigation?
The CFTC’s position remains the most critical factor. If the federal regulator officially backs prediction markets and asserts authority over sports-related event contracts, several shifts could occur:
- Federal preemption could make it harder for states to block or license these platforms.
- National reach: Operators might offer contracts nationwide without individual state gaming licenses.
- Regulatory shift: Oversight could move from gambling laws to a regime similar to that used for financial derivatives.
If courts instead rule that these contracts fall under state gambling laws, platforms may be forced to obtain licenses in each jurisdiction or limit access geographically.
The ripple effect on US betting markets
The surge in litigation signals that prediction markets have shifted from niche financial products to a primary focus of government regulation.
The stakes are high for traditional sportsbooks. If federally regulated prediction markets can operate without state licenses, they could compete directly with established betting companies under a different regulatory burden. For users, the outcome will determine whether these contracts remain broadly accessible or restricted by state lines.
The conflict serves as a national test case for how the US addresses emerging financial technologies that blur the line between trading and wagering.
