Massachusetts, Jan 21: A Massachusetts state court has ordered the prediction market operator Kalshi to halt operations in the state beginning Friday, dealing the platform a fresh legal setback in its fight with state gambling regulators.
Suffolk County Superior Court Judge Christopher Barry-Smith granted the injunction on Tuesday, siding with the state in a case that tests whether federally regulated event contracts tied to sports fall outside traditional state wagering laws.
The judge said details of the injunction still need to be finalised, particularly how to prohibit the sale of new contracts without affecting those already purchased. Massachusetts is due to submit a revised proposed order on Wednesday, with Kalshi able to respond by Friday morning. A hearing is scheduled for noon on Friday, after which the injunction is expected to take effect. Kalshi may seek a stay that would pause enforcement.
The lawsuit is the only case in which a U.S. state has directly sued Kalshi, and the only dispute between the company and a state being heard in a state court. In other jurisdictions, Kalshi sued regulators after receiving cease-and-desist orders.
Massachusetts Attorney General Andrea Campbell brought the case in September, arguing that Kalshi was violating state sports wagering laws by offering contracts without a licence. Kalshi unsuccessfully sought to move the case to federal court, a bid that was rejected in October.
At the heart of the dispute is Kalshi’s argument that state gambling laws are preempted by federal law because the company is regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act. Barry-Smith rejected that claim, ruling that while federal law preempts state regulation of futures trading, it does not displace state authority over gambling.
“In its opposition to the Commonwealth’s motion, Kalshi does not argue that its sports-related event contracts do not meet the definition of sports wagering in the Commonwealth,” the judge wrote. “Rather … Kalshi argues that the Commonwealth’s attempt to regulate its exchange … is preempted by federal law. As explained below, I disagree.”
Barry-Smith said Congress had not shown an intent to override what he described as traditional state police powers, such as gambling regulation, and noted that Kalshi did not dispute that it was operating in Massachusetts without a licence. He also rejected the company’s argument that it would be impossible to comply with both federal and state law, calling state licensure an additional regulatory burden rather than a conflicting regime.
“The undercurrent to Kalshi’s argument is that it would prefer to avoid the burden and expense of state licensure,” he wrote, adding that this was not enough to overcome the presumption against preemption.
The ruling echoes a decision in a federal case in Maryland, where a judge denied Kalshi an injunction that would have allowed it to continue operating there. In Nevada, a judge previously dissolved an order that had favoured Kalshi, though on narrower grounds related to whether the contracts qualify as financial “swaps.” Kalshi has appealed adverse rulings in both states and remains active there while the cases are heard.
Separately, the Nevada Gaming Control Board has sued rival platform Polymarket, seeking to block what it says is unlicensed wagering.
Barry-Smith said issuing an injunction against Kalshi served the public interest and dismissed claims that it would cause undue harm to the company or its users. “Kalshi knowingly proceeded in Massachusetts and other states that require sports wagering entities to be licensed,” he wrote, concluding that any hardship was “of its own making.”
Kalshi declined to comment on whether it will appeal. Any appeal would go to the Massachusetts Appeals Court, although the state’s Supreme Judicial Court could take the case directly.
