Massachusetts is no longer pursuing the case as an isolated state-level dispute. The attorney general of New York, Letitia James, together with 37 other attorneys general, has filed an amicus brief supporting the case Massachusetts brought against the prediction market operator.
Massachusetts filed its case against Kalshi in September 2025. The state alleges that Kalshi offered sports betting while violating state gambling laws. Kalshi rejects that argument and maintains that its products are swaps regulated by the Commodity Futures Trading Commission (CFTC).
A State-Level Fight Becomes a National Test
The dispute revolves around that key argument. Should the court accept it, states could lose much of their ability to control sports-style event contracts offered through federally regulated markets. If Massachusetts wins, prediction market operators may face a harder compliance path across the states.
Why the Attorneys General Object
The attorneys general argue that the nature of Kalshi’s sports contracts is similar to gambling, despite being presented as event contracts. They refer to the markets where users can take positions on winners, spread, performance of players, and other aspects of sporting events.
The attorneys general further criticize Kalshi’s claim that its sports event contracts are covered under the Dodd-Frank Act. According to the coalition, the 2010 legislation was enacted following the financial crisis with the intention to regulate complicated financial instruments. The purpose was not to legalize national sports betting through derivative legislation.
At the time of enactment of Dodd-Frank, most states lacked legal frameworks for sports betting due to the ban imposed by the federal government until 2018. The attorneys general argue that if Congress had any such intent, it would have been explicitly stated.
They add that the regulations at state level do not limit themselves to mere formalities such as licensing. The restrictions include age requirements, responsible gambling measures, marketing standards, exclusion list, suspicious activities, reporting mechanisms, and taxation. In their view, those protections cannot be replaced by financial-market oversight.
CFTC Takes the Opposite Position
Another amicus brief in the Massachusetts case has been filed by the Commodity Futures Trading Commission. It claims to have exclusive jurisdiction over commodity derivatives, including event contract markets popularly referred to as prediction markets.
As such, the court faces a choice between two different jurisdictions, while the states consider sport event contracts betting products subject to gambling laws within each state. The CFTC views the product as federally regulated contracts traded on regulated exchanges.
This issue is increasingly significant because of the rise of prediction markets in sports. According to the New York Attorney General’s office, Kalshi reported users betting more than $1 billion per month on the platform, with 90% of that amount tied to sports betting.
What to Watch Next
A win for Kalshi could bolster the claim that federal derivatives laws can protect certain prediction markets from state gambling enforcement. A win for Massachusetts could establish the point that calling sports wagers “event contracts” does not make such products exempt from state gambling laws.
For the industry, the case is important because it asks where the legal border now sits between finance and betting.
