On September 12, 2025, the Massachusetts Attorney General’s Office escalated its legal battle against Kalshi by filing a lawsuit in Suffolk County Superior Court. The suit accuses Kalshi of operating as an unlicensed sports betting platform, claiming that the prediction market operator accepted more than $1 billion in sports wagers during the first half of 2025. This development comes as part of an ongoing saga involving Kalshi and various regulatory bodies across the United States.
The lawsuit highlights that over 75% of Kalshi’s market activities involve sports event wagers. It suggests that Kalshi may derive a larger portion of its revenue from sports betting than established giants like DraftKings and FanDuel, which are pillars of the sports betting industry in the US. According to the complaint, Kalshi’s platform simulates a “digital gambling experience” and utilizes “behavioral design mechanisms drawn from gambling psychology.” The introduction of a parlay product and its marketing as a sports betting service further intensifies scrutiny.
Earlier this year, the Massachusetts Secretary of the Commonwealth launched an investigation into Robinhood for offering sports event contracts. This reflects a broader trend of financial platforms venturing into sports betting, thereby drawing the attention of regulators.
Kalshi, which started offering sports event contracts this year, is now under a magnifying glass as regulatory scrutiny mounts. In the spring, multiple states, including Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, and Ohio, issued cease-and-desist letters to the platform. In April, the Michigan Gaming Control Board announced investigations into the legality of sports prediction markets, and the Tennessee Sports Wagering Council urged the Commodity Futures Trading Commission (CFTC) to intervene and shut down these markets.
The CFTC, responsible for overseeing trading contracts, has so far allowed sports prediction markets to operate. However, an outgoing commissioner recently cautioned about the insufficient regulatory oversight during a farewell address. This warning adds another layer of complexity to the ongoing debate about the future of prediction markets within the United States.
While platforms like FanDuel are exploring entry into the prediction market space, the Ohio Casino Control Commission has expressed concerns. It warned that engaging in event markets could jeopardize the licenses of operators, emphasizing the precarious legal environment that surrounds prediction markets.
Kalshi has not only faced regulatory challenges but has also taken legal action in its defense. The company has filed lawsuits against regulatory entities in Maryland, Nevada, and New Jersey, where it continues to operate pending court decisions. In both Nevada and New Jersey, courts issued preliminary injunctions in favor of Kalshi, which the states are actively appealing. In Maryland, however, the court ruled against Kalshi, although the state agreed to delay enforcement while Kalshi appeals the decision.
Massachusetts Attorney General Andrea Campbell, one of 34 state attorneys general, filed a brief supporting New Jersey in its appeal against Kalshi. This collective stance underscores the seriousness with which states are approaching the regulation of prediction markets.
Adding to its legal challenges, Kalshi faces lawsuits from indigenous tribes. In July, three tribes from California sued Kalshi, alleging that its operations infringe on their rights under the Indian Gaming Regulatory Act. Similarly, the Ho-Chunk Nation of Wisconsin filed a lawsuit last month, further complicating Kalshi’s legal landscape.
Despite these challenges, Kalshi achieved a significant victory in October 2024 when it won a suit in the US Court of Appeals against the CFTC. This ruling allowed Kalshi to offer election event contracts, a decision that set a precedent and highlighted the nuanced legal framework within which these markets operate.
As the debate over the legality and regulation of prediction markets continues, the industry faces a potential turning point. Proponents argue that prediction markets offer valuable insights and innovation within the gambling sector. They suggest that with appropriate regulation, these markets could coexist with traditional sports betting platforms and enhance the overall gaming experience.
Conversely, critics argue that the rapid expansion of prediction markets poses significant regulatory challenges and risks undermining established gambling laws. They express concern that without stringent oversight, these platforms could exploit legal loopholes to engage in unregulated gambling activities.
The ongoing legal battles and regulatory scrutiny faced by Kalshi exemplify the broader struggles within the industry. As states grapple with the implications of prediction markets, the outcomes of these legal proceedings could set critical precedents for the future of this emerging sector. The stakes are high, and the decisions made in these cases will likely influence the trajectory of prediction markets not only in Massachusetts but across the nation.
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