A major legal battle over the legitimacy of prediction markets is escalating. A bipartisan coalition of 38 state attorneys general has filed an amicus brief with the Supreme Judicial Court of Massachusetts, backing the state's lawsuit against Kalshi, a platform that offers event contracts on outcomes such as sports games. The attorneys general allege that Kalshi is operating illegal, unlicensed sports betting, violating state gambling laws.
Kalshi's Defense: Swaps or Gambling?
Kalshi has consistently argued that its event contracts are financial instruments—specifically swaps—regulated by the Commodity Futures Trading Commission (CFTC), not by state gambling authorities. However, the attorneys general counter that the Dodd-Frank Wall Street Reform and Consumer Protection Act was designed to regulate financial products tied to the 2008 financial crisis, not to legalize nationwide sports wagering. They contend that the statute makes no mention of gambling and does not preempt traditional state authority over gaming.
New York Attorney General Letitia James stated on April 24: “Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers.” She added: “Kalshi’s event contracts for sports are just illegal gambling by another name, and they should play by the same rules as every other licensed gambling platform.”
Staggering Volume: Over $1 Billion Monthly, 90% Sports
The amicus brief reveals that during 2025, users placed more than $1 billion in wagers on Kalshi each month, with 90% tied to sports betting outcomes. This massive flow of money bypasses state licensing and consumer protection requirements, alarming regulators. The attorneys general are urging the court to uphold a lower court ruling that bars Kalshi from accepting bets from Massachusetts residents on sports events—unless the company obtains a proper license—while the litigation proceeds.
CFTC Enters the Fray: Exclusive Federal Jurisdiction Claimed
In a separate but related development, the CFTC filed its own amicus brief on April 24, 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.” This stance creates a potential conflict with state authorities: the CFTC argues federal law preempts state gambling laws, while the states insist that their traditional police powers over gambling remain intact unless Congress explicitly displaces them.
The legal landscape is further complicated by the CFTC's separate lawsuit against New York over prediction markets, as well as New York's own actions against Coinbase and Kalshi. Analysts predict that the Massachusetts case may ultimately reach the U.S. Supreme Court to resolve the jurisdictional tug-of-war.
Wide State Coalition and Broader Implications
The amicus brief is signed by attorneys general from 38 states and the District of Columbia, including Alabama, California, New York, Texas, and others. Their core argument: gambling regulation has historically been the domain of states, and any shift of authority requires clear direction from Congress. The outcome of this case will not only determine Kalshi's future but could also set a precedent for the entire prediction market industry, deciding whether such platforms must comply with state gambling regimes or can operate under exclusive federal oversight.