Massachusetts high court signals skepticism in Kalshi sports contracts case

The Massachusetts Supreme Judicial Court appeared skeptical of prediction markets operator Kalshi during oral arguments on Monday, as it weighs whether the company can offer sports-event contracts in the state, in a case that could shape a broader national fight over the regulation of such platforms.

The dispute centres on whether Kalshi’s contracts fall under federal oversight by the Commodity Futures Trading Commission or are subject to state gambling laws. Kalshi argues its products are derivatives, or “swaps,” regulated under the Dodd-Frank Act of 2010, and therefore outside the reach of state regulators.

“This is fundamentally a federal regulatory issue,” Kalshi’s lawyer Grant Mainland told the court, urging it to overturn a preliminary injunction that would bar the company from offering sports-event contracts in Massachusetts without a gaming license.

But several justices questioned how the company’s offerings differ from traditional sports betting.

Justice Gabrielle Wolohojian asked: “In what way do they differentiate from what would colloquially be known as a bet?”

Justice Scott L. Kafker also expressed doubt, saying: “If you want to gamble on a game, this is one way of doing it, right? This does seem to have a major aspect of sports gambling to it.”

Massachusetts, which sued Kalshi through Attorney General Andrea Joy Campbell, argues the platform is effectively offering sports betting without a license, undermining state authority over gambling regulation.

Assistant Attorney General Gerard Cedrone told the court that accepting Kalshi’s position “would be blocking out state regulation of what is in all respects a sports bet,” warning it could trigger a “sea change” in how gaming is regulated.

Kalshi has pointed to support from the CFTC and a recent ruling by the U.S. Court of Appeals for the Third Circuit backing the federal regulator’s authority in a related dispute involving New Jersey.

However, the Massachusetts court signalled concern that Congress did not clearly intend to strip states of their traditional role in regulating gambling when it passed Dodd-Frank following the 2008 financial crisis.

The case is part of a broader nationwide legal battle as prediction markets grow rapidly, allowing users to trade on outcomes of events such as sports and elections. State regulators argue such platforms risk bypassing consumer protections and age restrictions tied to licensed betting.

A preliminary injunction blocking Kalshi in Massachusetts remains on hold pending the appeal. If upheld, the ruling could reinforce states’ authority to regulate prediction markets and potentially set the stage for further litigation, including a possible review by the U.S. Supreme Court.

Campbell has framed the case as part of a wider effort by states to address gaps in oversight. “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,” Campell added.