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Statewide litigation against prediction markets continues, and the Massachusetts lawsuit against Kalshi could result in an industry-changing precedent.
The basis of the state’s suit is that Kalshi is offering sports-related prediction markets without a state wagering license—another front in the ongoing regulatory war over prediction markets. That case is now before the Supreme Judicial Court.
SJC evaluates regulation of prediction markets
The crux of Kalshi’s argument is that a Suffolk Superior Court judge ruled incorrectly when issuing a preliminary injunction against the prediction platform in January.
The Supreme Judicial Court is also examining the regulatory framework of prediction markets and whether they should remain under the purview of the federal Commodity Futures Trading Commission or state agencies.
Massachusetts, like all other states with legalized sports betting, maintains licensing and jurisdictional authority over sports wagering. The state argues that Kalshi is allowing sports bets while skirting state regulators.
Kalshi and Polymarket maintain that the trades are legitimate swaps of derivatives, making them subject only to the regulatory oversight of the CFTC. The CFTC has largely agreed with this position.
During oral argument on Monday, the High Court appeared skeptical of Kalshi. Justice Scott L. Kafker suggested that the prediction market’s offerings align closely with sports bets.
“If you want to gamble on a game, this is one way of doing it, right?” Kafker asked a Kalshi lawyer. “This does seem to have a major aspect of sports gambling to it.”
Should the SJC rule in favor of the state, it would establish a legal template for other states to follow.
States and gaming industry side with MA
The Commonwealth of Massachusetts is not going it alone in its legal fight. A bipartisan coalition of 37 other states filed a brief in support of Massachusetts, arguing that regulation of sports betting is the responsibility of the states.
In its brief, the coalition argued that Kalshi, masquerading as a swaps derivative outlet, undermines their ability to protect residents and regulate sports betting.
The Casino Association of New Jersey and the American Gaming Association also agreed, echoing the argument that Kalshi’s position puts state regulatory authority at risk.
