Federal Authority vs State Power: Andrea Campbell's Prediction Market Battle Could Reshape U.S. Regulation

The American prediction market industry faces a fundamental regulatory crossroads, with Massachusetts playing a pivotal role in determining whether the federal government or individual states control this emerging sector. A recent legal challenge from Polymarket targets the state government’s enforcement approach, and at the center of this dispute is Andrea Campbell, Massachusetts’ Attorney General, whose office has taken an aggressive stance against prediction market platforms operating within the state.

The Case That Started It All: From Kalshi to Polymarket

The escalation began when Massachusetts courts issued a preliminary injunction against Kalshi, one of Polymarket’s major competitors, treating its sports-related contracts as unlicensed gambling operations. This decision prompted Polymarket to escalate its own legal strategy, arguing that the federal government—specifically the U.S. Commodity Futures Trading Commission (CFTC)—holds exclusive jurisdiction over “event contracts.” According to Polymarket’s position, event-based derivatives like sports and political prediction markets fall squarely within federal regulatory domain, not state authority.

The Core Legal Argument: CFTC vs State Governments

Polymarket’s legal challenge directly contests Andrea Campbell’s enforcement strategy, asserting that Massachusetts lacks the authority to independently regulate or prohibit these platforms. The company contends that Congress has already delegated exclusive oversight of event contracts to the CFTC, making it the sole legitimate regulator nationwide. This creates a head-to-head clash between federal derivative market regulation and state-level gambling law interpretation—two different legal frameworks applied to the same platforms.

Why States Like Massachusetts Resist

While the CFTC views these platforms as specialized derivatives markets, state attorneys general like Andrea Campbell argue that prediction market operators are exploiting regulatory gaps to circumvent traditional state gambling protections. Massachusetts and Nevada have emerged as the most vocal opponents, suggesting that prediction markets operate identically to unlicensed sports betting and should face the same restrictions. This philosophical divide has led to multiple lawsuits and court injunctions across different states.

The Path Forward: From Federal Courts to Supreme Court

The outcome of this legal battle extends far beyond Polymarket. If Andrea Campbell’s Massachusetts position holds, prediction market platforms may face patchwork regulations across dozens of states, each with different rules. Conversely, if Polymarket prevails, the CFTC’s exclusive authority could exempt these platforms from state gambling enforcement nationwide. Legal experts suggest this dispute has the potential to escalate all the way to the U.S. Supreme Court, fundamentally restructuring how prediction markets operate in America. The resolution will determine whether the U.S. prediction market industry grows as a nationwide derivatives ecosystem or fragments under competing state regulations.