A coalition of 38 state attorneys general has backed a lawsuit against Kalshi, arguing the platform violates state gambling laws by offering unlicensed sports betting contracts.
The case, filed in Massachusetts, challenges whether Kalshi’s event contracts qualify as regulated financial instruments or illegal gambling under state law.
“Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers,”
Said Letitia James.
State officials argue Kalshi’s contracts function as sports betting, with over $1 billion in monthly wagers and roughly 90% tied to sports events.
Kalshi maintains its contracts are derivatives regulated by the Commodity Futures Trading Commission, placing them under federal jurisdiction rather than state oversight.
The CFTC has filed its own legal brief supporting federal preemption, asserting exclusive authority over prediction markets and commodity derivatives.
The Massachusetts court’s ruling could determine whether states retain control over gambling enforcement or cede authority to federal regulators in the fast-growing prediction market sector.