Kalshi is at the center of a major legal battle that could help define how prediction markets are regulated in the United States. A bipartisan coalition of 38 state attorneys general has filed an amicus brief in support of Massachusetts, arguing that Kalshi’s sports-related event contracts violate state gambling laws because they allegedly enable unlicensed sports betting.
The filing was submitted to the Supreme Judicial Court of Massachusetts and adds weight to the state’s position that gambling regulation remains primarily a state function. At stake is a broader legal question: whether prediction market platforms can offer contracts tied to sports outcomes under federal commodities law, or whether those products must comply with state gambling licensing requirements.
States argue Kalshi is offering gambling without a license
Massachusetts sued Kalshi in September 2025, alleging that the company was facilitating unlawful sports betting activity within the state. According to the attorneys general supporting the lawsuit, Kalshi’s “event contracts” allow users to wager on the outcome of events, including sports contests, in a way that is functionally no different from gambling.
New York Attorney General Letitia James said prediction markets cannot sidestep state gambling laws that were designed to protect consumers. She also argued that Kalshi’s sports event contracts are effectively illegal gambling under another name and should be subject to the same rules that apply to licensed gambling operators.
The coalition’s position is that states have long held the authority to regulate gambling, including the licensing, supervision, and enforcement mechanisms intended to limit consumer harm and prevent underage exposure. In their view, allowing a federally regulated framework to override those protections without explicit congressional instruction would significantly weaken state oversight.
Kalshi points to CFTC authority and federal derivatives law
Kalshi has defended its business by arguing that its products are financial instruments—specifically swaps or event-based derivatives—falling within the jurisdiction of the U.S. Commodity Futures Trading Commission. Under that theory, the platform contends that federal law governs the contracts and that state gambling regulators cannot treat them as conventional sports betting products.
The attorneys general reject that interpretation. They argue that the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted to regulate financial instruments and derivatives markets in the wake of the 2008 financial crisis, not to create a nationwide opening for sports wagering through prediction contracts. According to the coalition, the law does not expressly displace state gambling authority, nor does it mention gambling in a way that would justify such a sweeping shift in regulatory power.
The brief also emphasizes the historical backdrop. When Dodd-Frank became law, states were still barred under federal law from legalizing sports betting in most circumstances. That federal prohibition remained in place until 2018. For the states backing Massachusetts, that history undermines any argument that Congress intended Dodd-Frank to serve as a backdoor authorization for sports betting markets nationwide.
Billions in activity raise the stakes
The attorneys general highlighted the scale of activity on Kalshi’s platform, stating that users wagered more than $1 billion per month in 2025, with roughly 90% of that activity tied to sports betting. Those figures were cited to show that the dispute is not merely technical or theoretical, but instead concerns a large and rapidly growing market operating at the intersection of finance, gaming, and digital platforms.
The coalition is asking the Massachusetts court to affirm a lower-court ruling that prevents Kalshi from allowing Massachusetts residents to place sports-related bets while the litigation proceeds, unless the company first obtains the required state license. In practical terms, such a ruling would preserve state enforcement power during the case and reinforce the argument that these contracts cannot avoid local gambling rules simply because they are structured as event-based instruments.
CFTC enters the dispute on the other side
The legal conflict has become even more consequential because the CFTC has taken the opposite view. On April 24, the federal regulator also filed an amicus brief asserting that it has exclusive jurisdiction over prediction markets and that federal law preempts state regulation in this area.
CFTC Chairman Michael S. Selig said Congress entrusted the agency with sole authority to regulate commodity derivatives markets, including prediction markets. That statement frames the dispute as more than a single enforcement action against one platform. Instead, it presents a direct confrontation over whether event contracts should be supervised as derivatives under federal law or treated as gambling products under state law.
The CFTC’s intervention is especially significant because it introduces a clear federal-state conflict into the Massachusetts proceedings. If the court sides with the states, it could strengthen the ability of local regulators to challenge sports-linked prediction contracts across the country. If the federal argument prevails, prediction market operators may gain a stronger basis to offer such products without obtaining state gambling licenses.
A defining case for prediction market regulation
The Kalshi case now stands as a potential landmark in U.S. regulation of event contracts. On one side are state officials arguing that consumer protection, gambling harm prevention, and licensing oversight are traditional state responsibilities that cannot be brushed aside. On the other is the federal commodities regulator asserting that prediction markets belong within a nationally unified derivatives framework.
The outcome could have effects far beyond Massachusetts. A ruling that favors the states may limit how prediction market platforms structure and distribute sports-related products, especially where those products resemble conventional wagering. A ruling that favors Kalshi and the CFTC could expand the role of federally regulated event contracts and narrow the room for state gaming enforcement.
For now, the case captures a fast-emerging tension in U.S. markets: when a product looks like gambling, trades like a financial contract, and is marketed through a modern online platform, who gets to regulate it? The answer in Massachusetts may help determine the future compliance boundaries for prediction markets nationwide.