Kalshi sued Rhode Island officials on Thursday (May 21), accusing the state of trying to block its federally regulated prediction market business through threatened gambling enforcement. The complaint landed in the U.S. District Court for the District of Rhode Island and immediately escalated a widening national fight over sports-related event contracts.
The lawsuit names Rhode Island Attorney General Peter F. Neronha, Division of State Lottery Director Mark Furcolo, and Gaming and Athletics Administrator Christina Tobiasz. Kalshi said state officials appeared ready to move against the company over contracts traded on its federally regulated exchange.
“Rhode Island’s stated intent to prohibit Kalshi from operating intrudes upon the federal framework that Congress established for regulating the trading of derivatives on federally designated exchanges,” the company said in its complaint.
Kalshi runs a prediction market platform regulated by the Commodity Futures Trading Commission, or CFTC. Customers trade contracts tied to election outcomes, economic data, weather events, and sports results. The company argues those products are federally regulated derivatives rather than illegal gambling activity under state law.
According to the complaint, tensions rose during a May 20 meeting between Kalshi representatives and Rhode Island officials. Kalshi said the attorney general’s office questioned whether the exchange complied with state gaming laws and declined to promise advance warning before enforcement action.
“When Kalshi sought assurances that the Rhode Island Attorney General did not intend to bring an enforcement action against Kalshi, the Attorney General made clear that Kalshi would not receive any advanced notice before the state filed an enforcement action against the company,” the lawsuit states.
Kalshi and Rhode Island clash over federal-state jurisdiction
Only hours after Kalshi filed its case, Neronha announced Rhode Island had separately sued Kalshi and Polymarket in state court. The attorney general argued the companies’ sports event contracts are effectively unlicensed sports betting products under Rhode Island law.
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that.
“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 attorney general also linked the platforms to lost state revenue and addiction concerns. “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. Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction.”
Rhode Island joins several states challenging prediction markets. Wisconsin recently sued Kalshi and Robinhood over alleged illegal sports betting operations, while Kalshi also targeted Montana regulators over sports contracts. At the same time, federal judges in Arizona and other states have recently sided with Kalshi, finding the company was likely protected from state gambling enforcement because the CFTC oversees its exchange operations.
Kalshi is seeking declaratory relief along with temporary, preliminary, and permanent injunctions blocking Rhode Island officials from enforcing state gambling laws against the company.
Featured image: Kalshi / Canva
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