Polymarket’s lawsuit could decide who regulates US prediction markets

CoinTelegraph

by Dilip Kumar Patairya

February 19, 2026

AI-Generated Deep Dive Summary

Polymarket’s ongoing lawsuit against the state of Massachusetts has the potential to reshape the regulatory landscape for U.S. prediction markets. At stake is whether federal authority under the Commodity Futures Trading Commission (CFTC) exclusively governs these markets or if states retain the power to impose their own regulations. This legal battle could set a significant precedent, determining the future direction of an industry that has seen growing interest and investment in recent years. The dispute centers on how event contracts—central to prediction market platforms—are classified under existing laws. Polymarket argues that these should be treated as financial derivatives regulated by the CFTC, while states like Massachusetts argue they fall under gambling laws, which would allow state-level oversight. This classification issue is pivotal because it will influence whether federal or state regulations take precedence in this emerging sector. The lawsuit comes amid a series of state-level actions targeting prediction market platforms such as Kalshi, particularly those offering sports-related contracts. States like Nevada have also moved to restrict these activities, signaling a growing regulatory divide between federal and state authorities. Polymarket’s case is seen as a pivotal test of whether the CFTC has sole jurisdiction over derivatives, potentially affecting the broader crypto and blockchain industries. For crypto enthusiasts, the outcome of this lawsuit could redefine how prediction markets are regulated in the U.S. If the CFTC wins, it would likely lead to a more unified federal framework, offering clarity and possibly fostering growth in the sector. Conversely, if states prevail, it could result in a fragmented regulatory environment with varying rules across different regions, creating challenges for operators and participants alike. Ultimately, this legal battle is not just about prediction markets—it’s about determining the balance of power between federal and state regulators in the evolving landscape of cryptocurrency and blockchain technology. The decision will have far-reaching implications for innovation, compliance, and the future of decentralized financial systems (DeFi) in the U.S.

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Originally published on CoinTelegraph on 2/19/2026