Polymarket’s QCX sues Ohio over sports-contract licensing rules

QCX, Polymarket’s U.S. exchange, has sued Ohio officials in federal court to block the state from applying its sports-betting licensing rules to its event-contract business. The company is seeking preliminary and permanent injunctions, legal fees and other relief in QCX LLC v. Wilson et al., a case that was pending by Oct. 19.

The suit challenges Ohio’s demand that operators stop offering sports event contracts and confirm compliance with the state by Oct. 16. According to DeFi Rate, QCX contends that the licensing demands violate the Commerce Clause of the Ohio Constitution and are preempted by the federal Commodity Exchange Act.

QCX argues that Ohio’s framework improperly favors businesses with a physical presence in the state. Its complaint cites requirements concerning local operations, infrastructure spending and the length of an applicant’s Ohio presence, and says compliance would fragment its national exchange by forcing it to operate from Ohio and serve only customers physically in the state.

Ohio’s Casino Control Commission had sent cease-and-desist notices to 10 companies, targeting the operation of sports-event markets and the solicitation or acceptance of customer orders through brokerage businesses. The commission maintains that those activities amount to sports betting requiring an Ohio licence, and warned of possible administrative, civil, nuisance or criminal action.

As we reported Oct. 20, Gov. Mike DeWine said Ohio would file suits against businesses that continued to offer the contracts after the compliance deadline. The commission said two recipients were pursuing litigation, identifying Polymarket as one but not naming the other; it said one unnamed company had confirmed compliance while discussions with others continued.

The named recipients included Coinbase, Gemini Titan, MooMoo, Novig, Plus500, Polymarket, Robinhood and Webull. Kalshi was not among them because its dispute with Ohio was already before the courts.

The legal dispute turns on whether federal commodities law displaces state gambling regulation of sports event contracts. In an April 30 comment letter to the Commodity Futures Trading Commission, Ohio and a coalition of states argued that such contracts are indistinguishable from traditional sports betting, do not serve derivatives markets’ usual hedging, price-discovery or risk-allocation functions, and fall outside the statutory definition of swaps.

The federal courts have issued conflicting rulings. On Sept. 25, a three-judge Sixth Circuit panel affirmed the refusal of an Ohio federal court to grant Kalshi a preliminary injunction and, in a linked Tennessee appeal, vacated an injunction protecting the company. The panel rejected Kalshi’s attempt to establish that its sports contracts were swaps beyond state gambling enforcement.

That differs from an April 6 divided Third Circuit ruling that affirmed a preliminary injunction for Kalshi against New Jersey. The majority held that the Commodity Exchange Act likely preempted New Jersey gambling law as applied to the company’s contracts, while Judge Jane R. Roth dissented, describing the products as gambling and arguing that the presumption against preemption should carry particular force in an area traditionally regulated by states.

A Paul Weiss memorandum said prediction-market participants had brought comparable preemption cases against 11 states, including Ohio, illustrating how the question has spread beyond the state’s current enforcement campaign.