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Rhode Island Attorney General Peter F. Neronha sued prediction market operators Kalshi and Polymarket in state court on Thursday, alleging their sports event contracts violate state gambling laws because they function like traditional sports betting.
The lawsuit, filed in Rhode Island Superior Court, marks the latest escalation in a widening legal battle between U.S. states and prediction market platforms offering contracts tied to sporting events and player performances.
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” said Neronha in a press release. “The problem here is that Rhode Island state law heavily regulates gambling, for good reason, and we allege that Kalshi and Polymarket are evading our laws.”
The complaint argues that the platforms’ contracts resemble sports wagers because users can take “yes” or “no” positions on real-world outcomes, receive fixed payouts for correct predictions, and trade contracts tied to games and player performances.
“There is only one conclusion to be drawn from these similarities: Kalshi and Polymarket function, look, and feel like gambling because they are gambling,” the complaint said.
The legal action follows a preemptive lawsuit filed by Kalshi against Rhode Island seeking to block potential enforcement measures by the state.
“The Rhode Island Attorney General refused to provide any assurances that the state would refrain from enforcement,” Kalshi said in its filing. “This information makes clear that Rhode Island views Kalshi’s event contracts as illegal under its state laws and intends to act imminently against Kalshi’s federally regulated business.”
Rhode Island argued that prediction markets are harming state gaming revenue and consumer protections. According to the complaint, sports wagers in the state declined 8% from 2024 to 2025.
Neronha said the platforms avoid the tax obligations imposed on the state’s licensed online sportsbook operations.
“While these private companies continue to profit exponentially off hard-working people, the state’s third largest revenue stream is detrimentally affected, which means less money to fund critical parts of programs that serve Rhode Islanders every day,” he added.
The lawsuit further alleged that Kalshi and Polymarket lack safeguards comparable to those required of licensed sportsbooks and could increase gambling-related harms.
“Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction,” Neronha said.
Rhode Island is seeking a court declaration that the companies are facilitating gambling under state law, along with a permanent injunction, restitution, and disgorgement.
Kalshi is also facing legal or regulatory scrutiny in other states, including Arizona, Massachusetts, Michigan, Nevada, and Washington.
Earlier in the month, U.S. District Judge John C. Coughenour remanded Kalshi’s lawsuit in Washington back to state court, ruling that gambling regulation is a “state issue.” Kalshi had attempted to move the suit to a federal court.
In Arizona, Attorney General Kristin Mayes filed criminal misdemeanor charges against Kalshi, alleging the company operated an illegal gambling business without a license. However, state action is currently stopped by an injunction.