Massachusetts’ highest court appeared skeptical of Kalshi’s argument that its sports event contracts should sit outside state gambling law, putting the prediction market operator on the defensive in one of the country’s key state-level cases.
The Supreme Judicial Court heard arguments Monday over whether Kalshi can offer sports-linked contracts in Massachusetts without a state sports wagering license. The case is being watched closely because it tests the line between federally regulated derivatives and state-regulated betting products.
Justices questioned the betting distinction
Kalshi argued that its contracts are swaps regulated by the Commodity Futures Trading Commission, not sports wagers subject to Massachusetts gambling rules. The company’s position is that federal commodities law preempts state enforcement.
Several justices pressed that argument during the hearing. Justice Scott Kafker questioned whether Congress had clearly stripped states of their long-held role in regulating gambling, while Justice Gabrielle Wolohojian asked how Kalshi’s sports contracts differ from what most people would call a bet.
That line of questioning does not decide the case. It does show the court is testing whether Kalshi’s federal registration is enough to shield sports event contracts from state law.
Massachusetts says Kalshi bypassed local safeguards
Massachusetts Attorney General Andrea Campbell sued Kalshi last year, accusing the company of offering illegal sports wagering without a license. The state says Kalshi has avoided rules that apply to licensed sportsbooks, including age limits, responsible gambling controls and oversight by the Massachusetts Gaming Commission.
A Suffolk Superior Court judge issued a preliminary injunction earlier this year that blocked Kalshi from offering sports event contracts to Massachusetts customers. Kalshi appealed, arguing that the order conflicts with federal law and the CFTC’s authority over designated contract markets.
The attorney general’s case has also drawn support from a bipartisan group of 38 attorneys general, who filed an amicus brief defending states’ power to enforce gambling laws against prediction market platforms.
Ruling could deepen the national split
The Massachusetts case sits alongside a fast-moving national fight over prediction markets. Kalshi has had wins in some federal cases, including a recent Third Circuit ruling tied to New Jersey, while other state actions have moved in the opposite direction.
A ruling against Kalshi in Massachusetts would give state regulators another opening to argue that sports contracts can be treated as gambling even when they trade on a CFTC-regulated exchange.
The court did not issue a decision Monday. Its ruling will determine whether the Massachusetts injunction stays in place while the wider fight over prediction markets moves through federal and state courts.
