Massachusetts has taken direct aim at Kalshi, alleging that the prediction market is unlawfully offering sports wagering to state residents while attempting to disguise those activities as “event contracts.” According to the Commonwealth, Kalshi—one of the largest prediction markets in the country, valued at roughly $2 billion—has been operating without the required licensure from the Massachusetts Gaming Commission, in violation of G.L. c. 23N.

The state argues that Kalshi’s conduct exposes Massachusetts residents to significant harms, including public health risks associated with compulsive gambling, a clinically recognized behavioral addiction, as well as the potential for severe financial losses. Based on these alleged violations, the Commonwealth is seeking damages, civil monetary penalties, injunctive relief, attorneys’ fees and costs, and any other relief the court deems appropriate. Given the scope of the dispute and the fact that it challenges the legality of a substantial portion of Kalshi’s business, the case was properly assigned to the Business Litigation Session, where complex regulatory matters are typically handled.

Kalshi’s origins are not in sports. The company initially built its platform around contracts tied to election outcomes, weather events, and macroeconomic indicators such as inflation and unemployment. Those markets, however, quickly ran into legal resistance in other jurisdictions, prompting increased scrutiny. Over time, Kalshi gravitated toward sports-related contracts, and that shift proved transformative. Within just a few months of launching its sports trading platform, sports contracts became Kalshi’s dominant revenue source, rapidly outpacing its other offerings and reportedly exceeding the volume of major licensed sportsbooks during the same period. What began as a niche product quickly became the company’s cash cow.

At the heart of the lawsuit is a single question: does Kalshi need to become a licensed sports betting operator in Massachusetts, or is it exempt from state gambling laws because it claims to be “trading outcomes” rather than gambling? Kalshi’s defense rests almost entirely on federal preemption. The company argues that because it is regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act, federal law supersedes Massachusetts gambling law.

The court was not convinced.

In its decision, the judge focused on substance over labels, examining how Kalshi’s platform actually functions. The court found that the manner in which Kalshi’s contracts are offered closely mirrors other digital gambling experiences. Users are drawn into continuous feedback and engagement loops modeled after slot machine dynamics, complete with countdown clocks, leaderboards, and competitive social features. Users can create profiles and avatars and publicly compete against one another, reinforcing behaviors commonly associated with online wagering rather than traditional financial trading.

Language played a significant role in the court’s analysis as well. Kalshi has repeatedly borrowed gambling terminology, including the use of “football spread” to describe point spread contracts. Under Massachusetts law, a point spread bet is a defined sports wager. The platform also offers over/under contracts, proposition-style contracts, and parlay-style combinations, all of which are explicitly defined as sports wagering under G.L. c. 23N. The court further noted that prior to March 2025, Kalshi referred to itself in advertisements as “the first nationwide legal sports betting platform,” and its CEO publicly described the offerings as “bets.” Only after regulatory scrutiny intensified did Kalshi pivot to describing itself as a “regulated exchange dedicated to trading.”

Those facts were particularly damaging in light of how central sports contracts had become to Kalshi’s business. By early 2025, sports-related contracts accounted for approximately seventy percent of Kalshi’s total trading volume. Sports were no longer incidental—they were the core of the enterprise.

On the issue of federal preemption, the court methodically rejected every argument Kalshi advanced. There is no express preemption because Congress never stated that federal commodities law overrides state gambling laws. There is no field preemption because gambling regulation is a traditional area of state police power. And there is no conflict preemption because Kalshi can comply with both federal and state law by obtaining a sports wagering license, just as other operators are required to do.

The judge emphasized that when Congress intends to displace state gambling laws, it does so explicitly. Nothing in the Commodity Exchange Act suggests an intent to strip states of their authority to regulate sports betting. In fact, Congress has consistently left gambling regulation to the states, even while expanding federal oversight of financial markets. Courts in other jurisdictions, including Maryland, have already rejected Kalshi’s preemption arguments, reinforcing the conclusion that this theory is not legally viable.

Public interest considerations further weighed in the Commonwealth’s favor. Massachusetts’ sports wagering framework is designed to protect consumers, address compulsive gambling, prevent underage betting, and ensure regulatory oversight. Allowing Kalshi to operate without licensure would undermine those protections while giving the company an unfair competitive advantage over licensed sportsbooks that are subject to strict compliance obligations, taxes, and responsible gaming requirements.

Ultimately, the court concluded that Massachusetts is likely to succeed on the merits. The judge granted the Commonwealth’s request for a preliminary injunction and denied Kalshi’s motion to dismiss, making clear that Kalshi must obtain a sports wagering license before offering sports-related contracts to Massachusetts residents.

The takeaway from the ruling is straightforward. Courts are unwilling to let form override substance. When a product looks like sports betting, operates like sports betting, and is marketed using sports betting language, calling it “trading” does not place it beyond the reach of state gambling laws. Kalshi’s attempt to rebrand wagering as outcome trading may appeal to investors, but so far, it has failed to persuade judges.

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