Polymarket raises the Commerce Clause in its Ohio lawsuit

Lawsuits between prediction markets and states in the US have so far followed the same pattern. States argue that these platforms offer sports betting without a license. The markets say they fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) and that states cannot block them.

In its lawsuit against Ohio, Polymarket repeated this defense. But it added a new claim to the complaint: Ohio's regulation violates the Commerce Clause of the Constitution. The matter was announced by gambling law expert Daniel Wallach. According to the company, the state's requirement of a physical presence in Ohio and an in-state server for licensing amounts to discrimination against out-of-state businesses. Polymarket calls this practice "unjustified protectionism."

The lawsuit was filed after Ohio sent cease-and-desist letters to 10 prediction market operators, including Polymarket. Responding to such letters with lawsuits is now considered a routine step for the markets. It is unclear whether the new argument will find support in court. So far, states have prevailed in most of the cases, and the process is moving toward a possible showdown at the Supreme Court.

Some of Polymarket's listings are also drawing criticism. A market on whether any of the fraternity members known as the Cornell 7, who came to attention over a sexual assault allegation, would be charged with a felony sex crime had been opened on the international crypto exchange. This exchange is not subject to the same laws as Polymarket US. Even so, after trading volume exceeded $450,000, the market was taken down in response to the backlash. The Wall Street Journal reported that the platform has also opened markets on other high-profile cases. Legal experts point to the risk of jurors trading on their own cases and to concerns about insider trading.