The Massachusetts Supreme Court appeared skeptical of Kalshi Inc.’s claim that its prediction markets don’t fall under state gambling laws because the company is instead providing financial arrangements between people using “swap” contracts on events like sports.
The case is one of several legal fights involving states seeking greater oversight of prediction market companies, which argue their activities come under federal rules and should only be regulated by the US Commodity Futures Trading Commission. A judge barred Kalshi in Massachusetts, and the company appealed to the state’s high court, which has yet to rule.
During oral arguments Monday, some justices peppered Kalshi’s lawyer with questions, but also grilled an attorney for the state, which brought the initial suit against the company.
“If you want to gamble on a game, this is one way of doing it, right?” Chief Justice Scott L. Kafker asked a Kalshi lawyer during oral arguments Monday. “This does seem to have a major aspect of sports gambling to it.”
Kalshi attorney Grant Mainland argued to the justices that a provision in the 2010 Dodd-Frank Act updated the Commodity Exchange Act to “broaden the definition” of a swap.
Kafker responded, “The CFTC didn’t think it covered sports until the turn in the administration, right?”
The Trump-era CFTC has largely sided with prediction markets, and the industry has been lobbying to fight stricter rules, even as platforms like Polymarket have drawn national attention from controversies such as insider trading.
Read More: Prediction Markets Step Up Lobbying to Fight Stricter Rules
State solicitor Gerard Cedrone argued that prediction markets don’t have the same consumer protections as state-licensed betting.
Justice Serge Georges Jr. noted that Kalshi operates “this marketplace where users set odds with each other. Doesn’t that resemble more of a financial exchange rather than a house-based system” comparable to casino-style wagers?
Massachusetts was the first state to sue Kalshi last year, winning a preliminary injunction against in January for violating the state’s sports wagering statute. After Kalshi challenged the enforcement, the state’s Supreme Judicial Court fast-tracked its appeal.
The outcome of the case against is being closely watched, in part because it could end up before the US Supreme Court. Other cases include pending decisions by federal appeals courts in Kalshi’s bid to overturn a ruling in favor of Nevada regulators and another in which the company prevailed over New Jersey regulators.
The battles have also had a unifying effect for state officials who disagree with the CFTC’s view that it has “exclusive jurisdiction” over the exchanges, a position the agency embraced under the Trump administration. A bipartisan group of almost 40 state attorneys general from New York to Alabama joined an amicus brief supporting Massachusetts’ lawsuit against Kalshi.
Massachusetts Attorney General Andrea Joy Campbell told Bloomberg in March that she saw the state efforts as filling a regulatory gap left by the federal government.
“As the federal government steps away from consumer protection, state AGs have stepped up as evidenced by my office’s ongoing lawsuit against Kalshi,” she said. “We will continue to ensure that anyone who wants to offer sports betting in Massachusetts is licensed and proactively works to address any risk of fraud and the significant public health consequences that often accompany sports betting.”
Photo: Kalshi Inc.s logo displayed on a smartphone. Bloomberg.
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