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A Charleston County resident has sued DraftKings and Polymarket, alleging their sports prediction market contracts amount to illegal gambling under South Carolina law.
The case matters because it directly tests a key question hanging over prediction markets in the US: whether federally regulated event contracts can operate in states that still prohibit traditional sports betting. According to the complaint, filed July 29 in Charleston County Court, the platforms are relabeling sports betting as financial trading to get around South Carolina’s gambling ban.
The plaintiff, James M. Hughes, alleges the companies and their partners “incite, offer, and collect winnings from illegal wagers placed by South Carolinians on the outcome of sporting events,” according to arguments in the filing. The complaint also says the contracts are “functionally identical to those found in casinos, sportsbooks, and other traditional gambling establishments.”
Lawsuit Seeks Damages and Recovery of Gambling Losses
In addition to DraftKings and Polymarket, the lawsuit names several other entities involved in the prediction market ecosystem, including CME, Crypto.com, and multiple market makers.
Hughes is represented by Motley Rice, a plaintiffs’ law firm based in Mount Pleasant, South Carolina.
The suit seeks recovery of alleged gambling losses, treble damages, and court costs. It relies on South Carolina Code § 32-1-20 and the state’s version of the centuries-old Statute of Anne.
Under that law, a person can sue to recover an illegal gambling loss of $50 or more if the original loser fails to bring a claim within three months.
Notably, Hughes says he never traded on a prediction market himself and has no direct financial stake in the case. His standing appears to stem from the statute’s provision allowing another individual to pursue recovery when the original participant does not act within the prescribed period.
Federal Regulation Could Clash With State Gambling Laws
South Carolina remains one of 11 states without legal sports betting. Despite that, Polymarket and DraftKings Predictions continue to operate in the state because they hold Designated Contract Market licenses from the Commodity Futures Trading Commission (CFTC).
That regulatory status is expected to form the core of the defendants’ legal defense.
DraftKings and Polymarket are likely to argue that federal oversight of their event contracts preempts South Carolina gambling law. Neither company had commented on the lawsuit as of publication.
Broader Implications for Prediction Markets
The case is the latest flashpoint in an ongoing national debate over how sports prediction markets should be regulated.
Supporters argue that event contracts are federally regulated financial products, while critics contend they function as sports betting under a different name.
The outcome may ultimately hinge on whether the Charleston County court views the contracts as lawful products overseen by federal regulators or gambling activity prohibited by South Carolina law.
