Polymarket has gone on the offensive.

 

The crypto-powered prediction market has filed a federal lawsuit against the state of Massachusetts, arguing that state regulators are overstepping their authority as they move to block sports-related prediction markets. The case puts Polymarket on a collision course with state gambling laws and could determine how far U.S. states can go in policing a fast-growing corner of crypto-finance.

 

At stake is a much bigger question than one company’s business model. The lawsuit tests whether prediction markets should be treated as federally regulated financial instruments or as another form of sports betting that states can license, restrict, or ban outright.

 

 

A Growing Clash Between States and Prediction Markets

Prediction markets allow users to trade on the probability of future events. Elections, economic data releases, interest rate decisions, and increasingly, sports outcomes. Traders buy and sell contracts that pay out based on what actually happens, with prices shifting in real time as sentiment changes.

 

Supporters argue these markets are closer to financial derivatives than gambling. Critics, especially state regulators, say sports-based contracts look and feel like wagers, regardless of how they are structured.

 

That tension has been simmering for years, but it boiled over recently when Massachusetts moved to shut down Kalshi’s sports-related markets. Kalshi operates as a federally regulated exchange under the Commodity Futures Trading Commission, yet a Massachusetts court sided with the state, granting regulators the power to block those contracts locally.

 

For Polymarket, that ruling was a warning shot.

 

 

Why Massachusetts Matters

Massachusetts has become ground zero for the state-level pushback. The state’s attorney general has argued that sports prediction contracts violate local gambling laws and should not be allowed without a state-issued license. Courts have so far been receptive to that argument, at least on an interim basis.

 

The implications extend far beyond one state. Regulators in Nevada and other jurisdictions have cited the Massachusetts case as justification for their own enforcement actions. If one state can successfully reclassify prediction markets as gambling, others are likely to follow.

 

Polymarket’s lawsuit is designed to stop that domino effect.

 

 

Polymarket’s Core Argument

Polymarket’s legal case is straightforward and ambitious.

 

The company argues that event-based contracts fall squarely under federal commodities law and that the CFTC has exclusive authority to regulate them. If that view holds, states would be barred from using gambling statutes to restrict or ban prediction markets, even when those markets involve sports.

 

In other words, Polymarket is asking the court to draw a hard line between federally regulated markets and state gambling oversight.

 

The lawsuit also reflects a strategic shift. Rather than waiting for a cease-and-desist or injunction, Polymarket is preemptively seeking judicial clarity before Massachusetts or other states can formally block its offerings.

 

 

Sports Markets Are the Flashpoint

Sports contracts sit at the center of the controversy for a reason. Unlike political or economic forecasts, sports betting is already heavily regulated at the state level, with billions in tax revenue flowing through licensed sportsbooks.

 

State officials argue that prediction markets offering contracts on game outcomes undermine that system and create an unlicensed alternative to traditional betting.

 

Prediction market operators counter that their products are fundamentally different. Prices are set by traders, not oddsmakers. Positions can be bought and sold before outcomes are known. Risk is distributed across a market, not absorbed by a house.

 

Courts have not yet settled which interpretation carries more weight.

 

 

The Broader Stakes for Crypto and Finance

The outcome of Polymarket’s lawsuit could shape the future of prediction markets in the U.S. If states prevail, platforms may be forced to geo-block large portions of the country or abandon sports contracts entirely. That would likely slow growth and limit mainstream adoption.

 

If Polymarket wins, it could establish a powerful precedent. Federal preemption would give prediction markets a clearer regulatory runway and could encourage more institutional participation in event-based trading.

 

There is also a competitive angle. Traditional sportsbooks operate under state licenses and strict compliance regimes. Prediction markets that fall outside those systems could disrupt the sports betting industry, which has expanded rapidly since the repeal of PASPA.

 

 

The Bottom Line

The case is still in its early stages, but the direction is clear. Prediction markets are no longer operating in a gray area that regulators are willing to ignore.

 

As states push back and platforms respond with federal lawsuits, the U.S. is heading toward a defining legal moment for event-based markets. Whether they end up regulated like derivatives or treated like gambling will determine not just where these platforms can operate, but what kind of products they can offer at all.

 

For now, Polymarket has drawn its line. The courts will decide how far states can go in crossing it.

 

 

Crypto.com is leaning harder into prediction markets, and it is doing so with a clear message: this is no longer a side experiment.

 

The exchange has launched OG, a standalone prediction markets app that pulls event trading out of the main Crypto.com platform and gives it its own dedicated product. The move comes at a moment when prediction markets are not just growing, but accelerating, driven by sports, politics, and a broader appetite for trading real-world outcomes.

 

For Crypto.com, spinning prediction markets into their own app is a signal that this category is starting to matter in a way it did not before.

 

 

Why Crypto.com Is Breaking Prediction Markets Out on Their Own

OG focuses on event contracts that allow users to trade on the outcome of future events, starting with high-profile sports like the Super Bowl. Over time, the company says it plans to expand into financial events, politics, entertainment, and culture.

 

What sets OG apart from many crypto-native prediction platforms is its regulatory structure. The contracts are offered through Crypto.com’s U.S. derivatives arm, which operates under federal oversight. That positioning allows Crypto.com to frame prediction markets as regulated financial products rather than gambling, a distinction that has become increasingly important in the U.S.

 

There is also a product reason for the separation. Prediction markets behave differently than spot crypto trading. They move faster, they are driven by opinion and information flow, and they tend to be more social by nature. OG leans into that with features like leaderboards and community-style engagement, along with aggressive incentives aimed at onboarding early users.

 

Crypto.com has used that playbook before, and it is betting it works again here.

 

 

Prediction Markets Are Booming

Prediction markets are seeing record activity across the industry. Recent data shows combined monthly trading volume on leading platforms Kalshi and Polymarket has climbed for six straight months, rising from roughly $2 billion last August to nearly $17.5 billion in January.

 

That growth has been fueled by a mix of major sports events, political cycles, and growing interest in markets that reflect real-world probabilities rather than token price action. For many users, trading on whether something will happen feels more intuitive than trading whether a coin will go up or down.

 

Sports, in particular, have become an entry point. They are familiar, emotionally charged, and easy to understand. From there, users often branch into macroeconomic events, policy decisions, and cultural moments that attract attention well beyond crypto.

 

 

How Event Trading Actually Works

At its core, prediction markets allow users to buy and sell positions tied to whether an event happens or not. Prices move based on collective belief. A contract trading at 65 cents implies the market sees about a 65 percent chance of that outcome occurring.

 

As new information enters the market, whether it is an injury report, polling data, or an economic release, prices adjust in real time.

 

In regulated environments, these contracts are treated as derivatives. That classification is what allows companies like Crypto.com to operate nationally, rather than navigating a patchwork of state-level gambling rules. It is also what opens the door, at least in theory, to more advanced features like leverage and margin trading on event outcomes.

 

Crypto.com has signaled interest in going down that path, pending regulatory approval.

 

 

Regulation Is Becoming the Real Battleground

As prediction markets grow, regulation has become the defining line between platforms.

 

Some operate entirely outside the U.S. framework, relying on crypto-native liquidity and offshore structures. Others are betting that long-term scale depends on regulatory clarity, even if that means slower iteration and tighter constraints.

 

Crypto.com has clearly chosen the second route. By anchoring OG to a federally regulated derivatives entity, the company gains credibility with regulators and institutions, and potentially access to a much larger user base.

 

That does not eliminate risk. Legal interpretations continue to evolve, and prediction markets still sit in an uncomfortable gray area between finance and betting. But for now, regulation looks less like a constraint and more like a competitive advantage.

 

Kalshi and Polymarket have established themselves as leaders, particularly around political and macro events. Other major exchanges are watching closely, and in some cases preparing their own entries. Prediction markets offer something many crypto products struggle with: relevance to people who do not care about crypto prices.

 

Crypto.com’s advantage is distribution. The company already knows how to onboard millions of users through mobile-first products, and OG is clearly designed to plug into that existing funnel.

 

Whether that is enough to stand out in this crowded field remains an open question.

 

 

The Bottom Line

Prediction markets have moved out of the margins and into the center of the crypto conversation.

 

Crypto.com’s launch of OG reflects a broader shift in how exchanges are thinking about growth. Not everything needs to revolve around tokens. Not every product needs to look like a traditional exchange. The fact that Crypto.com has a huge user base as an traditional exchange definitely makes this latest move smart, and it is certainly following the trend of exchanges becoming more than just a place to buy and sell. They are beginning to offer a full suite of products for an ever-growing customer base.

 

By turning real-world events into tradable markets, prediction platforms tap directly into attention, opinion, and information flow. If OG succeeds, it could help push prediction markets...and Crypto.com even more in to the mainstream.

Tennessee Orders Kalshi, Polymarket, and Crypto.com to Halt Sports Prediction Contracts

 

Tennessee regulators have ordered Kalshi, Polymarket, and Crypto.com to immediately stop offering sports-related prediction contracts to residents of the state, escalating a growing conflict between state gambling authorities and federally regulated prediction markets.

The Tennessee Sports Wagering Council issued cease-and-desist orders on January 9, demanding that the three platforms halt all sports event contracts, void any open positions tied to Tennessee users, and refund customer funds by the end of the month.

State officials argue the products function as unlicensed sports betting under Tennessee law, regardless of how the companies describe them.

The move places Tennessee alongside a growing list of states pushing back against prediction markets that allow users to trade contracts based on the outcomes of sporting events, elections, or real-world events. While the platforms frame these products as financial instruments, state regulators increasingly see them as gambling by another name.

 

What Tennessee Is Demanding

According to the orders, Kalshi, Polymarket, and Crypto.com must immediately cease offering sports contracts to Tennessee residents. Any existing sports-related contracts must be canceled, and all funds deposited by users in the state must be returned by January 31.

Failure to comply could expose the companies to civil penalties, injunctions, and possible criminal enforcement under Tennessee’s sports gaming laws.

The council’s position is straightforward. If money is being risked on the outcome of a sporting event, the state considers it sports wagering, which requires a license, tax payments, and adherence to consumer protection rules.

 

The Regulatory Fault Line

At the heart of the dispute is a long-running jurisdictional battle between state gambling regulators and the federal framework governing derivatives and commodities trading.

Kalshi and Polymarket operate under federal oversight tied to commodities regulation, and Crypto.com has positioned its event contracts as a similar financial product. The companies argue that their platforms fall outside traditional sports betting laws and should be regulated at the federal level.

Tennessee, like several other states, rejects that argument. State officials maintain that federal oversight does not override state authority when it comes to gambling conducted within state borders.

This disagreement has become one of the most contentious regulatory issues facing crypto-adjacent markets in the U.S.

 

A Pattern Across the States

Tennessee’s action is not an isolated case. Over the past year, multiple states have issued warnings or cease-and-desist orders targeting prediction markets tied to sports outcomes. Recently, Coinbase filed suit against Connecticut, Michigan, and Illinois. Those states argue that Coinbase's prediction markets amount to illegal gambling and are attempting to ban them there.

Gaming regulators in states such as Nevada, New Jersey, Maryland, Ohio, and Illinois have raised similar concerns, arguing that prediction markets undermine state-regulated sports betting ecosystems while avoiding licensing requirements and taxes.

In some cases, platforms have pulled back voluntarily. In others, companies have opted to fight.

Kalshi has already challenged similar enforcement actions in court, arguing that state gambling laws are being improperly applied to federally regulated markets. The outcome of those cases could shape the future of prediction markets nationwide.

 

Why States Are Pushing Back Now

State regulators say the issue is not just about definitions, but about consumer protection and regulatory consistency.

Licensed sportsbooks are required to meet strict standards related to age verification, responsible gambling tools, fund segregation, and auditing. States argue that prediction markets offering sports contracts operate outside those guardrails while competing for the same customers.

There is also growing concern that prediction markets blur the line between financial trading and gambling in ways existing laws were never designed to address.

For regulators, allowing these products to operate unchecked could weaken the authority of state gaming frameworks that were carefully built following the legalization of sports betting.

 

What Happens Next

The Tennessee order adds new pressure on Kalshi, Polymarket, and Crypto.com at a time when prediction markets are expanding rapidly and attracting increased attention from both traders and policymakers.

The companies could comply and exit the state, challenge the order in court, or push for clearer federal guidance that limits states’ ability to intervene.

Until that happens, the industry remains stuck in a regulatory gray zone, where legality depends less on federal approval and more on how individual states choose to interpret decades-old gambling laws.

 

For crypto-linked prediction markets, Tennessee’s action is another reminder that regulatory risk in the U.S. remains fragmented, unpredictable, and increasingly aggressive.