R.I. attorney general sues Kalshi, Polymarket alleging prediction market operators skirted sports betting laws
PROVIDENCE — Rhode Island Attorney General Peter F. Neronha is suing Kalshi and Polymarket, alleging the prediction market operators have conducted sports betting on their platforms while skirting the state’s gambling laws.
In the lawsuit filed in Providence County Superior Court on Thursday, Neronha’s office asked the court to declare that the two company’s sports-related “event contracts” — which allow users to place wagers on the outcomes of sporting events and player performances — are essentially sports betting operations that are subject to follow the state’s gambling regulations.
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” Neronha said in a statement. “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.”
New York-based Kalshi was apparently anticipating the lawsuit. The company filed its own lawsuit against Neronha and other state officials in US District Court in Providence on Thursday, asking a judge to block Rhode Island’s “intrusion into the federal government’s exclusive authority to regulate derivatives trading.”
“As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it’s subject to exclusive federal jurisdiction,” Elisabeth Diana, a spokesperson for Kalshi, wrote in an email on Friday. “It’s fundamentally different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments.”
The lawsuits come as states across the nation have attempted to regulate the increasingly popular online prediction markets. The platforms operate similar to financial futures markets to allow participants to buy and sell “event contracts” based on their expectations on the outcomes of everything from sports games to elections.
In January, a Massachusetts judge granted a preliminary injunction to bar Kalshi from conducting business in the state after Attorney General Andrea Campbell sued the company in September. But the injunction has not taken hold as Kalshi has appealed the decision.
Meanwhile, a judge in Nevada in April extended the state’s ban on Kalshi, Reuters reported, and earlier this week, Minnesota passed legislation to ban prediction markets there.
Still, some other states have faced an uphill battle. In April, a federal judge temporarily blocked Arizona from applying its gambling laws against market operators, the Associated Press reported. The federal government has sued the state as well as Connecticut and Illinois, arguing the Commodity Futures Trading Commission regulates such companies, not state agencies.
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Reached for comment about Rhode Island’s lawsuit on Friday, a spokesperson for Polymarket said, “This action runs counter to the CFTC’s established framework for regulating prediction markets.”
Still, Neronha argues the Rhode Island Lottery is authorized to regulate online sports wagering. Kalshi and Polymarket “lack any of the necessary prerequisites to carrying out a legal gambling operation in Rhode Island — such as the constitutionally-mandated voter approvals and the required relationship with the Rhode Island Lottery, including but not limited to license and state oversight,” the lawsuit states.
Since sports betting was legalized in the state in 2019, it has brought $2.8 billion in revenue — money Rhode Island “depends heavily on,” Neronha’s office said. With the rise of prediction markets, the lottery saw bets drop by about 8 percent between 2024 and 2025, officials said.
“Rhode Islanders are losing out,” Neronha said. “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.”
Additionally, Neronha said the platforms are providing people suffering with gambling addiction “unfettered access” to placing bets.
“We demand Kalshi and Polymarket stand down, abide by our state laws, and disgorge their profits, and this lawsuit is the first step towards that goal,” Neronha said.
In its lawsuit, Kalshi contends its operations adhere to federal laws and state gambling laws that seek to regulate it are “preempted,” citing recent federal court rulings.
“The State’s efforts to regulate Kalshi are preempted under principles of express preemption, field preemption, and conflict preemption,” the lawsuit states. “This Court should therefore issue temporary, preliminary and permanent injunctions, as well as grant declaratory relief.”
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This story has been updated to include comment from Polymarket.
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