A powerful coalition of 38 U.S. state attorneys general has thrown its weight behind Massachusetts in its lawsuit against prediction market platform Kalshi, escalating the legal battle over whether such platforms can bypass state gambling laws. The amicus brief, filed April 24 with the Supreme Judicial Court of Massachusetts, argues that Kalshi's "event contracts" — particularly those tied to sports outcomes — constitute illegal sports betting conducted without a state license.
Bipartisan State Attorneys General Unite Against Kalshi
Led by New York Attorney General Letitia James, the signatories include attorneys general from Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin, and the District of Columbia. In the brief, they assert that gambling regulation has historically been a state prerogative and that any shift in authority would require clear congressional intent.
"Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers." — New York Attorney General Letitia James
The attorneys general highlight that in 2025, Kalshi users wagered more than $1 billion per month on the platform, with 90% tied to sports betting. They argue that Kalshi's offerings are indistinguishable from traditional sports betting and must comply with state licensing requirements. They are urging the court to uphold a lower court ruling that blocks Kalshi from offering sports-related contracts to Massachusetts residents unless the company obtains a proper license.
Kalshi's Defense: Federal Derivatives, Not State Gambling
Kalshi contends that its event contracts are financial instruments known as swaps, regulated by the Commodity Futures Trading Commission (CFTC) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Massachusetts filed its lawsuit in September 2025, alleging unlawful sports betting. Kalshi responded by asserting exclusive CFTC jurisdiction. The attorneys general reject that argument, noting that Dodd-Frank was enacted to address financial instruments tied to the 2008 recession and never intended to nationalize sports gambling. They point out that the statute does not mention gambling and does not displace state authority.
CFTC Enters the Fray: Federal Preemption vs. State Police Powers
On the same day, the CFTC also filed an amicus brief asserting exclusive jurisdiction over prediction markets. CFTC Chairman Michael S. Selig stated: "Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets." The agency has separately sued New York State over its lawsuit against Coinbase, which also touches on prediction market regulation. The dual filings — one from states demanding enforcement of gambling laws, the other from the federal regulator claiming preemption — set the stage for a landmark court decision. This ruling could determine whether states can enforce gambling licensing rules against event-based contracts or whether the CFTC holds the sole key. The outcome will have far-reaching implications for the crypto and derivatives industries, potentially reshaping the landscape for prediction markets across the United States.