Sports Betting Showdown: Massachusetts Takes on Kalshi

A recent court decision has put a temporary halt to some online sports betting activities in Massachusetts. The case centers around Kalshi, a prediction market that lets people buy and sell contracts based on future events, much like betting on sports outcomes. The state argues that Kalshi is operating without a proper license, while Kalshi claims it is federally regulated and not subject to state laws. In September, the state's attorney general filed a lawsuit to stop Kalshi from operating unlicensed. The company argued that federal regulations preempt state laws, but a judge disagreed. Judge Christopher K. Barry-Smith ruled that Congress did not intend to bar states from regulating sports betting when it passed laws to regulate the derivative market. He stated that the state's Sports Wagering Law is a valid exercise of traditional state police power. This ruling is not the final say in the matter. It is a preliminary injunction, meaning Kalshi cannot operate in Massachusetts while the legal battle continues. The judge concluded that the attorney general's position was likely to prevail, making the injunction appropriate. Both sides have until a certain date to submit draft injunctions to the judge.The attorney general welcomed the ruling, emphasizing that any company involved in sports gaming in Massachusetts must follow state rules. The chair of the Massachusetts Gaming Commission also supported the decision, highlighting the importance of regulated operators for safe betting. Kalshi has faced legal challenges before. In 2024, it successfully sued the Commodity Futures Trading Commission, arguing its right to offer contracts based on political events. This victory boosted the popularity of prediction markets. For example, during the 2024 presidential election, people could bet on the outcome by buying contracts for different candidates. Kalshi's platform allows users to bet on sports events, similar to licensed operators. The state alleges that Kalshi bypasses consumer protections required of licensed operators and allows users as young as 18 to bet, which is below the legal age for online sports wagering in Massachusetts. Kalshi has responded by stating that it offers a fair and transparent marketplace regulated by federal laws. The company argues that Massachusetts is relying on outdated laws and regulations to block its innovations.