Michigan Attorney General sues Kalshi over legality of prediction markets
Michigan’s Attorney General Dana Nessel has filed a lawsuit seeking to block prediction platform Kalshi from operating in the state.
The lawsuit, which has been filed in Ingham County Circuit Court, says that Kalshi’s event-based trading platform is effectively an online sportsbook operating without the licenses required under the state’s Lawful Sports Betting Act.
The state is asking the court to declare Kalshi a sports betting operator and issue a permanent injunction stopping it from operating in Michigan.
Kalshi allows users to buy and sell contracts tied to the likelihood of specific events, ranging from weather to geopolitical developments. However, Michigan officials say it effectively allows users to wager on sports outcomes.
The complaint argues that only licensed commercial casinos and federally recognized tribal casinos can apply for sports betting licenses through the Michigan Gaming Control Board. As Kalshi is neither, the state claims it cannot legally offer sports-related betting in Michigan.
In a press release, Nessel said, “Corporations cannot circumvent state gaming laws. My office will hold those who sidestep Michigan’s consumer protections accountable and ensure that betting in our state remains lawful, fair and subject to the oversight our residents expect and deserve.”
The case is part of a broader national dispute over how prediction markets should be regulated. The oversight of these platforms is under the Commodity Futures Trading Commission, which considers them to be financial products, not sports betting markets.
Michigan joins Nevada and Massachusetts in taking legal action against Kalshi, highlighting growing tensions between state gambling regulators and prediction market companies.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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2025/09/13: Massachusetts Attorney General sues Kalshi for illegal sports wagering operations
2025/04/23: Prediction markets platform Kalshi files lawsuit in Maryland
2025/10/08: Kalshi sues Ohio in a bid to prevent being blocked from operating
2025/10/28: Kalshi sues New York regulators over event contracts rules
2025/09/13: Massachusetts Attorney General sues Kalshi for illegal sports wagering operations
2025/04/23: Prediction markets platform Kalshi files lawsuit in Maryland
2025/10/08: Kalshi sues Ohio in a bid to prevent being blocked from operating
2025/10/28: Kalshi sues New York regulators over event contracts rules
The Backstory
Why prediction markets are colliding with state gambling laws
Kalshi’s expansion into event-based contracts has collided with a patchwork of state gambling rules and a parallel federal system that treats the same products as financial instruments. The company says it offers regulated swaps on real-world outcomes. State officials say many of those products walk and talk like sports bets and must follow the same licensing, tax and consumer protection regimes as sportsbooks. That split has triggered a cascade of lawsuits and cease-and-desist orders across the country, as attorneys general and gaming regulators test where finance ends and gambling begins.
In recent months, Kalshi has faced a wave of actions beyond the Midwest. Massachusetts’ attorney general sued the platform, alleging it unlawfully promoted and accepted online sports wagers that mirror moneyline, spread and total markets offered by licensed books. Regulators in Ohio warned partners away from doing business with the firm and set up a court fight over preemption. Maryland’s lottery commission ordered Kalshi to stop operating, prompting a countersuit. New York’s gaming commission became a fresh flashpoint over whether prediction markets are subject to state gambling oversight or exclusively federal derivatives rules.
States press their case, one courthouse at a time
Massachusetts fired one of the first broadside suits, accusing Kalshi of “unlawfully promoting and accepting online sports wagers” and seeking to halt operations while the case proceeds. The complaint says Kalshi’s yes-or-no sports event contracts are functionally identical to traditional wagering and bypass age limits, deposit caps and other safeguards required of licensed operators. The filing also alleges Kalshi markets through major channels, including retail brokerage platforms, without the approvals state law requires. Read more in the state’s case against the company in Massachusetts Attorney General sues Kalshi for illegal sports wagering operations.
Ohio escalated matters with an Oct. 7 federal complaint from Kalshi that seeks to block the state from enforcing its threats to bar the platform and penalize partners. The suit says Ohio’s stance has chilled business development and conflicts with federal law. The Ohio Casino Control Commission had issued a cease-and-desist letter in early 2025 and warned other sportsbooks that working with Kalshi, even outside Ohio, could jeopardize their licenses. For details on the clash and the multistate support for state authority, see Kalshi sues Ohio in a bid to prevent being blocked from operating.
In Maryland, Kalshi flipped from defendant to plaintiff after the state’s lottery and gaming regulator ordered it to stop operating. Kalshi argues the directive is preempted by federal commodities law and has asked a court for injunctive and declaratory relief. The filing leans on the idea that Congress gave the Commodity Futures Trading Commission power over event-based derivatives on designated exchanges and left little room for states to contradict that framework. The dispute is summarized in Prediction markets platform Kalshi files lawsuit in Maryland.
New York joined the fray when Kalshi sued the state’s gaming commission, claiming federal law provides exclusive jurisdiction over prediction markets and that New York’s actions improperly interfere with lawful financial instruments. The complaint arrives amid similar tensions in New Jersey and follows steps by Nevada to treat sports event contracts as wagers under state law. The broader stakes for trading apps and data-rights deals are outlined in Kalshi sues New York regulators over event contracts rules.
Federal turf fight: finance rules or gambling laws
The core legal question is whether sports-related event contracts are swaps under the Commodity Exchange Act or bets under state gaming law. Kalshi says the contracts function as peer-to-peer hedging tools and should sit squarely under the CFTC’s supervision. Several states counter that when the underlying event is a game and the payoff mirrors traditional markets, the product is sports betting by another name.
The lines blurred further in Washington. A CFTC nominee with ties to Kalshi faced scrutiny over potential conflicts and the agency’s stance on event contracts. During a June 10 hearing, lawmakers questioned whether involvement with a prediction market platform could color judgments on a category the nominee publicly described as an evolving “hedging tool.” Coverage of the hearing and the nominee’s position appears in Kalshi director and CFTC nominee advocates for prediction markets. The Senate Agriculture Committee’s docket for the session is posted at agriculture.senate.gov, and prepared testimony is available as a PDF at Testimony_Quintenz_06.10.2025.pdf.
Kalshi’s preemption arguments hinge on the idea that once the CFTC permits an exchange to list a class of contracts, states cannot reclassify the same activity as illegal gambling. States reply that consumer protection, public health and taxation of gambling are squarely within their police powers, especially when the products target sports fans and look indistinguishable from sportsbook menus.
Safeguards, age limits and a public health push
Massachusetts’ case lays out the consumer angle most clearly. The attorney general alleges Kalshi’s operations allow users as young as 18 to participate in sports-related markets, below the state’s online sports betting age of 21, and lack required tools like deposit limits, wager caps and responsible gambling notices. The office’s public-health posture predates the lawsuit, including a campaign to address youth gambling harms. See the state announcement of its public-private initiative at mass.gov.
Massachusetts also filed a civil complaint detailing alleged violations and the rationale for immediate injunctive relief. The filing underscores how the state views event contracts as de facto wagers that should be restricted to licensed operators. The complaint is posted at mass.gov/doc/kalshi-final-filed-complaint. That focus on age gates and consumer tools has echoed in other jurisdictions where regulators say prediction markets are encroaching on sports betting without paying state taxes or contributing to responsible gambling programs.
The push to clamp down has accelerated since industry surveys suggested many Americans view sports event contracts as akin to betting. Regulators have cited that perception in warning that the products might normalize wagering for younger users unless brought under existing rules.
What’s at stake for Kalshi, rivals and investors
The legal outcomes will shape how prediction markets scale in the United States. A win for Kalshi in federal court could bolster the case for CFTC-led oversight of event contracts and limit states’ ability to wall off sports-adjacent products. A loss would likely force prediction platforms to seek state sportsbook licenses, adopt gambling compliance systems and pay related taxes, reshaping their cost structures.
Meanwhile, the marketplace keeps moving. Kalshi secured a temporary injunction against Nevada’s regulator, a step a judge said could clarify the model’s legality as broader cases unfold, as noted in Prediction markets platform Kalshi files lawsuit in Maryland. The platform also entered a multi-year data and rights deal with the NHL alongside Polymarket, raising fresh questions about whether data partnerships with leagues imply sports wagering activity. That development is covered in Kalshi sues New York regulators over event contracts rules.
The broader tech and finance sectors are watching how courts draw the line between trading and gambling. Apps that blur those categories risk being pulled into state licensing regimes. Brokerages that host or route event contract activity could face scrutiny from gaming regulators. And if states prevail, prediction markets may fragment into a state-by-state licensing patchwork, slowing growth and dampening investor appetite.
For now, the battleground spans multiple courts. Each ruling feeds the next, building a record on preemption, consumer risk and whether a yes-or-no contract on a game is a hedge or a wager. The answer will determine who regulates a fast-growing corner of the market and how far it can go.
