South Carolina Resident Sues DraftKings, Polymarket Under 1710 Statute Over Prediction Markets

A South Carolina resident has filed an unusual lawsuit challenging the legality of prediction markets in a state where sports betting remains prohibited. James M. Hughes, a Charleston County resident, initiated litigation against DraftKings Predictions and Polymarket on July 29, along with exchanges and clearing houses including CME and Crypto.com, plus multiple market makers providing liquidity to these platforms.

The complaint centers on Hughes' assertion that prediction markets are operating illegal sports betting operations under South Carolina law, despite holding Designated Contract Market (DCM) licenses from the Commodity Futures Trading Commission (CFTC). Hughes alleges the platforms have rebranded traditional sports betting as 'sports event contracts' to claim federal regulatory jurisdiction, circumventing state prohibitions.

What makes this case particularly distinctive is that Hughes himself has never traded on prediction markets. Instead, he is pursuing damages on behalf of other South Carolinians who have incurred losses on these platforms. The lawsuit relies on South Carolina Code Section 32-1-20, derived from the 1710 Statute of Anne - a colonial-era British law that originally addressed copyright protections but also included gambling debt provisions. Modern South Carolina maintains among the most aggressive applications of this historical statute, allowing any person to recover illegal gambling losses exceeding $50. Notably, if the person who suffered the loss does not sue within three months, state law permits any member of the public to pursue damages.

Under Hughes' interpretation, customers' losses on prediction markets constitute recoverable damages. His legal team, represented by the national plaintiffs' firm Motley Rice headquartered in Mount Pleasant, SC, is seeking triple damages plus litigation costs - remedies explicitly contemplated by the statute.

Motley Rice attorney T. David Hoyle framed the argument plainly: 'Defendants incite, offer, and collect winnings from illegal wagers placed by South Carolinians on the outcome of sporting events. These wagers are functionally identical to those found in casinos, sportsbooks, and other traditional gambling establishments.'

The defendants have not yet responded to the complaint. Their defense will likely rest on federal preemption - arguing that CFTC licensing and regulation of prediction markets as financial derivatives shields them from state gambling prohibitions. The CFTC has already affirmed that sports event contracts fall within its regulatory authority, establishing potential conflict between federal and state jurisdiction.

South Carolina remains one of only 11 states where sports betting is illegal, creating distinct regulatory tension as prediction market platforms expand nationally. The case exemplifies growing friction between state-level gambling enforcement and federal regulatory frameworks for derivatives markets. Courts will need to determine whether prediction markets constitute gambling under traditional state law definitions or qualify as federally regulated financial instruments beyond state jurisdiction. The outcome could influence how other prohibition states approach prediction market platforms operating within their borders.