A Charleston County resident has initiated legal action against DraftKings and Polymarket, claiming that their sports event contracts violate South Carolina state gambling laws, despite never having engaged in prediction market trading.
James M. Hughes, a concerned resident of Charleston County, has filed a lawsuit claiming that DraftKings and Polymarket’s offering of prediction markets constitutes illicit sports betting under state law.
Both Polymarket and DraftKings Predictions function as federally regulated financial trading platforms in South Carolina, operating under Designated Contract Market (DCM) licenses granted by the Commodity Futures Trading Commission (CFTC).
Hughes asserts that these platforms have disguised illegal sports betting as “sports event contracts,” asserting that they qualify as financial derivatives regulated by the CFTC. The CFTC has acknowledged its authority over these contracts.
In addition to the focus on the prediction markets, Hughes has identified exchanges and clearinghouses, including CME and Crypto.com, as parties in the suit. Several market makers—financial firms that enhance the liquidity of prediction markets by engaging in trades—are also included as defendants.
Unconventional Lawsuit for Damages
Interestingly, Hughes has not experienced any direct financial setback from the operations of Polymarket, DraftKings, or the other defendants in South Carolina. Instead, he seeks monetary compensation based on legislation from over 300 years ago originating in Great Britain.
The “Statute of Anne,” enacted in 1710 and primarily associated with copyright law, also addressed gambling debts, permitting individuals financially harmed by gambling to seek restitution through legal proceedings.
This British statute significantly influenced early American legal practices and remains relevant today.
South Carolina is noted for its stringent enforcement of the Statute of Anne’s gambling provisions. According to South Carolina Code § 32-1-20, anyone may reclaim gambling losses of $50 or more, and if the individual doesn’t file a lawsuit within three months, any member of the public can pursue the damages on their behalf.
Hughes is aiming to recover losses incurred by users of Polymarket and DraftKings Predictions. His legal representation comes from Motley Rice, a prominent plaintiff law firm based in Mount Pleasant, SC.
The situation is simple: the defendants are provoking, enabling, and profiting from unlawful bets placed by residents of South Carolina on sporting events. These bets are virtually indistinguishable from those conducted in traditional casinos and sportsbooks.”
— T. David Hoyle, attorney at Motley Rice
“Hughes aims to recover the losses suffered by South Carolina residents from the defendants’ illegal sports betting activities. Furthermore, as stipulated by the statute, he is also seeking triple damages along with legal expenses,” stated Hughes’ legal representatives in the filed complaint.
It’s important to note that South Carolina remains one of eleven states where sports betting is still prohibited.
Evaluating the Case’s Validity
The defendants have not yet issued a response to the lawsuit, which was filed on July 29 in Charleston County Court.
It is anticipated that DraftKings and Polymarket will seek to have the case dismissed, arguing that their prediction markets are federally regulated and hence exempt from the implications of the South Carolina Statute of Anne.