Polymarket has initiated legal action against Ohio officials, seeking an injunction following a cease-and-desist letter issued by the state's gaming regulator this month. The company contends that the authority of the Commodity Exchange Act (CEA) should take precedence over state gaming laws and argues that Ohio’s gaming regulations are both discriminatory and unconstitutional.
In its complaint filed on October 16, Polymarket asserts that Ohio’s enforcement actions against prediction markets violate the U.S. Constitution’s Commerce Clause. It states, "Ohio’s threatened enforcement through its protectionist licensing regime violates the U.S. Constitution’s Commerce Clause and is preempted by the Commodity Exchange Act (CEA). On the view that lawful derivatives are sports gambling, Defendants demand that Polymarket US’s nationwide exchange contort itself to fit a state regulatory scheme designed for in-State casinos."
The complaint points out that Ohio laws allow wagering licenses only for approved applicants with a physical presence in the state. It adds, "Assuming a license were available, Polymarket US’s operations would not just have to be run from Ohio—they would be limited to serving only those physically present in Ohio, cutting the company off from the rest of the United States. These discriminatory, balkanizing measures violate the Constitution’s promise of open, interstate commerce."
Among the defendants named are Ohio Attorney General Andy Wilson and Andromeda Morrison, the Executive Director of the Ohio Casino Control Commission (OCCC). Polymarket has requested both preliminary and permanent injunctions against the state. Communications with Wilson’s office and the OCCC for comments were sought but have not yet been received.
Joshua Kirschner, a partner at Holland & Knight and deputy team leader of its gaming practice, observed that while Polymarket's claims about Ohio's sports betting laws being unconstitutional are striking, their arguments seem simplistic. Kirschner explained, "If you strip it all away, what Polymarket is really saying is just that an intrastate sports betting regime should not be applied to interstate commodities activity that is appropriately regulated by the CEA. It shouldn’t be construed to mean that every state sports betting regime would be illegal, per se."
He noted that Polymarket's assertion that the OCCC's market is illegal due to its protective stance seems misguided. It appears to place the federal court in a position of determining the overall legality of a state sports betting regime designed for intrastate activity rather than addressing Polymarket's classification under the CEA. Kirschner remarked, "This argument that the OCCC’s regime is merely for protectionist purposes and therefore illegal on its own seems to miss the point on a few counts. That would be news to tons of states and tons of state laws."
The complaint comes shortly after the OCCC dispatched cease-and-desist letters to Polymarket and nine other companies, claiming they were illegally offering sports event contracts in Ohio. The commission stated that sports event contracts fall under Ohio’s definition of sports gaming, which requires state licensing, and instructed the recipients to cease operations by October 16.
On the day the lawsuit was filed, Polymarket argued that the state's enforcement actions against it violate the Commerce Clause by discriminating against out-of-state commerce. The suit emphasizes potential consequences for Polymarket, exposing it to civil penalties and criminal prosecution if forced to comply with Ohio's demands. The lawsuit notes, "Even the threat of enforcement forces Polymarket US to choose between exercising its federal right to operate nationwide and submitting to unlawful state coercion."
Ohio's stance echoes a recent ruling from the U.S. Court of Appeals for the Sixth Circuit, which sided with Ohio and Tennessee in a dispute against Kalshi. The panel found unanimously that Kalshi’s sports event contracts were not classified as swaps under the CEA and that federal commodities law did not preempt state sports betting laws.
Ohio Governor Mike DeWine announced this week that the state intends to file lawsuits against those who fail to comply with the cease-and-desist orders. He stated, "The law is very clear. The court decisions have been very clear. The attorney general of Ohio is taking actions he needs to take. These are not self-executing. You have to actually go out and file these suits, and that’s what we are going to do."
