Kalshi is facing a significant setback as a preliminary injunction has been secured that may prevent the company from offering sports and related event contracts on its prediction market in Massachusetts. The injunction, obtained by Massachusetts Attorney General Andrea Joy Campbell, was announced on January 20, 2024, following a lawsuit filed against Kalshi in September 2023.
The preliminary injunction prohibits Kalshi from accepting contracts related to sports events from customers within the state until the company is licensed by the Massachusetts Gaming Commission (MGC). It also requires adherence to various state laws governing sports gaming. In a press statement, Campbell emphasized the significance of this ruling, stating, “The Court has made clear that any company that wants to be in the sports gaming business in Massachusetts must play by our rules — no exceptions.”
The injunction is seen as a crucial step towards reinforcing Massachusetts’ gambling laws and addressing potential public health issues associated with unregulated gaming. Kalshi has not provided a public comment regarding the injunction.
According to the Attorney General’s office, Campbell’s lawsuit alleges that Kalshi’s event contracts essentially qualify as sports wagering. The company has neither applied for nor received a sports wagering license from the MGC. A hearing is scheduled for January 23, 2024, to discuss the implementation of the ban and evaluate whether it will be temporarily paused should Kalshi choose to appeal the injunction.
The presiding judge indicated that the injunction will aim to limit its impact on Kalshi’s operations while ensuring compliance with state regulations. Notably, while Kalshi is currently engaged in legal disputes with various states, this is the first instance where its activities have faced an injunction.
Kalshi’s legal team contends that the sports event contracts do not fall under state gaming laws, arguing that they are regulated solely by the U.S. Commodity Futures Trading Commission (CFTC). This situation highlights the growing tension between federal and state regulators regarding prediction markets, which have increasingly become a point of contention as several states move to shut down operations they consider unlicensed or illegal.
In December 2023, Kalshi raised $1 billion in a Series E funding round, with plans to expand its prediction market platform. The company aims to accelerate consumer adoption, integrate more brokerages, establish new partnerships, and broaden its range of products.
As the legal landscape evolves, the outcome of this case may have broader implications for the future of prediction markets across the United States.
