Rhode Island Sues Kalshi and Polymarket

Rhode Island has launched legal action against prediction market operators Kalshi and Polymarket, escalating the growing national dispute over whether sports-related event contracts should be treated as financial products or illegal sports betting.

Attorney General Peter F. Neronha announced that Rhode Island filed a lawsuit in Superior Court seeking a declaration that sports event contracts offered by the two companies fall under the state’s gambling laws. The filing also seeks to block the platforms from continuing to offer sports-related contracts to Rhode Island users.

The legal battle intensified further after Kalshi filed its own lawsuit in federal court hours earlier, attempting to stop the state from taking enforcement action against the company.

The competing lawsuits add Rhode Island to a growing list of states engaged in court fights over prediction markets and sports-related event contracts.

Rhode Island Says Event Contracts Mirror Sports Betting

According to Rhode Island Attorney General’s Office (.gov), the prediction market structure used by Kalshi and Polymarket closely resembles traditional sports wagering despite using different terminology and contract mechanics.

“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that.”

The lawsuit argues that the companies allow users to take financial positions on sporting outcomes through “yes” or “no” contracts tied to games and player performances. Users receive a fixed payout if their prediction is correct and lose their stake if it is not.

State officials claim the products effectively operate as sportsbooks while avoiding Rhode Island’s gambling framework, which permits sports betting only through the state-controlled Sportsbook RI platform.

The complaint also points to platform features that Rhode Island believes resemble traditional gambling products. According to the filing, Kalshi uses leaderboards and betting activity updates that encourage continued wagering behavior.

The Attorney General’s office stated: “Kalshi prompts users to gamble with leaderboards and constant updates on how other users are placing bets. Such design choices have long been known to encourage addictive gambling behavior.”

Rhode Island also cited previous statements made by Kalshi regarding its own products.

“Kalshi has repeatedly referred to its products as ‘betting’ and ‘wagering’ both in marketing and litigation,” the state alleged.

The lawsuit further argues that prediction markets are impacting state revenue tied to legalized sports betting. Rhode Island officials stated that sports wagering has generated $2.8 billion in revenue since legalization in 2019, while Rhode Island Lottery officials reportedly observed an 8% decline in betting activity from 2024 to 2025 as prediction markets expanded.

Neronha tied the legal action to both financial and responsible gambling concerns.

“While these private companies continue to profit exponentially off hard-working people, the State’s third largest revenue stream is detrimentally affected,” he said.

He also added: “Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction.”

Kalshi Defends Federal Oversight

Kalshi’s federal lawsuit argues that its products are federally regulated financial derivatives overseen exclusively by the Commodity Futures Trading Commission (CFTC), not by individual states.

The company stated that Rhode Island officials made it clear during a May 20 meeting that enforcement action was likely.

According to Kalshi’s complaint: “When Kalshi sought assurances that the Rhode Island Attorney General did not intend to bring an enforcement action against Kalshi, the Attorney General made clear that Kalshi would not receive any advanced notice before the state filed an enforcement action against the company.”

Kalshi argued that Rhode Island’s position threatens the uniform federal oversight structure established under federal commodities law.

The company claimed the state was creating the “patchwork of state-by-state regulation Congress sought to prevent.”

Kalshi continues to frame prediction markets as financial instruments with hedging value for businesses exposed to sports outcomes and event-driven volatility.

In its filing, the company stated: “Event contracts are a valuable means to hedge against event-driven volatility.”

Kalshi also referenced Federal Reserve research discussing the informational value of prediction markets. One cited paper stated: “Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.”

The company signaled that it intends to pursue emergency injunctive relief as the litigation proceeds.

Broader Fight Continues Across the US

Prediction markets have expanded rapidly into sports over the past year, drawing increasing attention from regulators, lawmakers, tribal gaming groups, and sportsbook operators.

Kalshi and Polymarket maintain that their products are federally supervised derivatives markets regulated by the CFTC. States challenging the platforms argue that the contracts function as unauthorized sports betting under local gambling laws.

The Rhode Island dispute mirrors ongoing cases in states including Nevada, Massachusetts, Washington, Iowa, and Utah. Courts in several jurisdictions have already dealt with procedural battles over whether state lawsuits should remain in state court or move to federal court.

Rhode Island’s lawsuit seeks declaratory relief, a permanent injunction preventing the offering of sports-related event contracts in the state, restitution, and disgorgement of profits.

The next stage of the case will likely focus on jurisdictional questions and whether federal commodities law preempts Rhode Island’s gambling regulations.