By Nate Raymond
BOSTON, Dec 9 (Reuters) – Massachusetts’ attorney general will ask a judge on Tuesday to block prediction-market operator Kalshi from letting state residents bet on sports through its online platform, arguing that the company is running an unlicensed gambling enterprise.
The hearing in a state court in Boston marks the first time a U.S. state has sought a court order to prevent Kalshi from allowing users to bet on the outcomes of sporting events like football and basketball games by buying so-called “events contracts.”
Gaming regulators in at least nine other states have sent Kalshi cease-and-desist letters claiming the New York-based company is operating an unlicensed sports wagering business in violation of state law.
Massachusetts is the first to go a step further by launching an enforcement action against Kalshi. Massachusetts Attorney General Andrea Joy Campbell is asking Suffolk County Superior Court Judge Christopher Barry-Smith for a preliminary injunction that would shut down its operations in the state.
Kalshi gives its users the opportunity to profit from predictions on events ranging from sports and entertainment to politics and the economy. It began offering sports events contracts nationally in January. Retail trading platform Robinhood allows its users to trade such contracts as well through Kalshi’s exchange.
Campbell, a Democrat, in a lawsuit filed in September argued that Kalshi was offering sports wagering under the guise of event contracts without seeking a license from the Massachusetts Gaming Commission.
While licensed gaming operators in the state are barred from offering sports wagering to anyone under 21, Kalshi’s “wagers are offered to 18-year-olds and are available today in high-school cafeterias,” the state said in a brief.
Kalshi counters that state gaming laws like Massachusetts’ do not apply to its business, which is subject instead to the U.S. Commodity Futures Trading Commission’s exclusive jurisdiction.
The company says its products trade exclusively on a CFTC-regulated exchange and are classified as “swaps” under the Commodity Exchange Act – derivative contracts between two parties that hinge on the outcome of a specific event or contingency.
Its position suffered a major legal setback two weeks ago, when a federal judge in Nevada, a leader in gambling regulation, found that Kalshi was subject to that state’s gaming rules, holding that the outcomes of sports matches do not legally constitute “events” under federal law.
A federal judge in Maryland reached a similar conclusion, while a judge has blocked New Jersey from enforcing its laws against Kalshi. Both rulings are now on appeal. Kalshi also has lawsuits pending challenging cease-and-desist orders it received from regulators in New York and Connecticut.
(Reporting by Nate Raymond in Boston, Editing by Alexia Garamfalvi and Bill Berkrot)
