Massachusetts Attorney General (AG) Andrea Joy Campbell recently filed a lawsuit in Suffolk Superior Court against KalshiEX LLC (Kalshi), an online prediction market platform, alleging that the platform runs an illegal sports wagering operation without an appropriate license in Massachusetts. The complaint asserts that Kalshi offers Massachusetts consumers the equivalent of sports betting under the guise of “event contracts,” letting users wager yes-or-no options on sporting outcomes just like traditional bets. In the AG’s view, these contracts closely resemble sports wagers offered by licensed sportsbooks, and Kalshi actively promoted its sports products via TV and social media in the Commonwealth while allowing trades through third-party apps like Robinhood. Because Kalshi asserts that its event contract business does not constitute gaming, Kalshi never obtained a license from the Massachusetts Gaming Commission to engage in gaming-related activities.

Campbell’s lawsuit claims that Kalshi’s operation lacks key consumer protections. Investigators say the platform accepted bets from users aged 18 to 20 despite the state’s prohibition against individuals under the age of 21 engaging in online sports wagering and failed to implement robust responsible gambling measures such as deposit limits. Without these safeguards that would apply to traditional gaming operations, the AG argues that Kalshi’s offerings are unsafe for consumers and could exacerbate risks of addiction and financial harm, especially among young consumers. The AG is seeking an injunction to halt Kalshi’s sports contracts in the state.

Robinhood’s Response: A Lawsuit Asserting Preemption

In a rapid response to the AG’s action, Robinhood — which partners with Kalshi to offer event contracts to its users – filed its own lawsuit on September 15. Robinhood asked the U.S. District Court for the Northern District of Massachusetts to block the state from interfering with its sports event contract trading, arguing that state authorities have no jurisdiction over these activities. In the filing, Robinhood contends any state enforcement would violate the Supremacy Clause by attempting to supersede the Commodity Exchange Act (CEA), the federal law under which Kalshi’s market is regulated.

Widening Regulatory Scrutiny of Kalshi’s Predictive Market Contracts

These developments in Massachusetts are just the latest in a series of actions by states that have balked at the platform’s predictive market contracts, arguing that they constitute an end run around the states’ traditional regulatory authority over gaming. Additional states that have taken action include:

• Nevada: In early 2025, the Nevada Gaming Control Board issued a cease-and-desist order deeming Kalshi’s sports and election contracts as unlawful gambling. Kalshi sued in federal court, arguing Nevada’s gaming laws were preempted by the CEA, since Kalshi operates as a Commodity Futures Trading Commission (CFTC)-designated contract market. A federal judge agreed, granting Kalshi a preliminary injunction that blocked Nevada regulators from halting its sports contracts. The court found that Kalshi was likely to prevail on the merits of its preemption claim.
• Maryland: Maryland’s gaming authority likewise ordered Kalshi to stop offering predictive sports contracts in the state, prompting Kalshi to sue on similar federal preemption grounds. Unlike Nevada, however, the Maryland court denied Kalshi’s request for an injunction, reasoning that there was no clear distinction between Kalshi’s contracts and traditional sports betting. This meant Maryland could treat Kalshi’s products as illegal gambling. Kalshi quickly appealed this ruling to the U.S. Court of Appeals for the Fourth Circuit.
• New Jersey: Similarly, New Jersey regulators ordered Kalshi to cease operating in the state in early 2025. A U.S. district court sided with Kalshi — barring New Jersey from enforcing its gambling laws against the company — and the state appealed. During recent Third Circuit oral arguments, judges appeared skeptical of New Jersey’s position, questioning how sports event contracts could be excluded from the broad federal definition of “swaps” under the CEA. The panel noted that the CEA gives the CFTC exclusive jurisdiction over designated contract markets.
• Other States: Beyond these lawsuits, Kalshi has received cease-and-desist letters from at least four other states — Arizona, Illinois, Montana, and Ohio — over its predictive market contracts. In addition, lawsuits have been initiated against Kalshi by tribal governments in California and Wisconsin.

Why It Matters

The lawsuit against Kalshi in Massachusetts underscores the unresolved legal questions surrounding event-based prediction markets and state gambling prohibitions. At the center is a novel jurisdictional conflict around whether contracts predicting sports outcomes are a form of regulated commodity trading under exclusive federal oversight, or are a form of sports wagering that states can outlaw or regulate. So far, regulators and courts are divided. Cases in Nevada and New Jersey suggest a willingness to view Kalshi’s markets as federally sanctioned instruments outside state control. A federal court in Maryland, by contrast, saw no meaningful difference between Kalshi’s contracts and a bet via a sportsbook, and upheld the state’s right to regulate or prohibit those contracts under state gambling laws. The Massachusetts AG has now taken a firm stance that Kalshi must obtain a sports betting license and follow state laws if it wants to operate in the state.

These cases will set important precedent for how prediction markets are treated going forward. If courts ultimately side with state regulators, Kalshi and similar platforms might face fragmented compliance burdens — having to tailor or shut down their offerings state by state in line with gambling laws. Conversely, a ruling in favor of federal preemption could pave the way for broader adoption of event-based contracts nationwide, effectively opening new markets even in jurisdictions that ban traditional sports betting. Businesses involved in prediction markets will be forced to navigate an uncertain landscape and closely follow these cases as they make their way through the district and appellate courts.

Troutman Pepper Locke State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
	Clay Friedman – Co-leader Clay co-leads the firm’s State Attorneys General practice and is nationally ranked by Chambers USA for AG Government Relations and in Best Lawyers for Advertising Law. He has dedicated his entire career to state attorney general and federal work, serving for nearly a decade in a senior role and more than 25+ years in private practice. Clay focuses his practice on helping industry-leading companies mitigate the risks associated with state and federal regulatory investigations and associated litigation.
	Chris Carlson Chris advises clients on regulatory, civil, and criminal investigations and litigation. With a background as an assistant attorney general, he provides practical guidance to clients with matters involving state attorneys general and federal regulatory agencies.
	Lauren Fincher Lauren has vast experience handling state attorneys general investigations, navigating complex regulatory compliance matters, and providing strategic counsel in enforcement actions across various industries. She helps clients manage high-stakes regulatory matters and guides them through complex legal landscapes.
	Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, representing clients in single and multistate enforcement actions, including inquiries and investigations, as well as litigation involving state attorneys general and other state and federal governmental enforcement bodies. He has significant experience handling actions with federal agencies, including the CFPB and FTC, as well as single plaintiff and class action litigation for clients in highly regulated sectors such as financial services, health care, pharmaceutical, and education.
	Michael Yaghi Mike handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Samuel E. “Gene” Fishel Gene is a former regulator with two decades of experience who has overseen state privacy and cybersecurity regulation enforcement, led national, multistate attorneys general privacy investigations, and prosecuted computer crimes at the state and federal levels. He has served at the forefront of state attorney general and federal enforcement, and utilizes this experience to proficiently represent client interests.
	Jeff Johnson Jeff helps clients navigate complex regulatory and litigation challenges with local, state, and federal authorities. His clients benefit from his decade of broad litigation experience, understanding of emerging state and federal regulatory issues, and strong relationships with attorneys general across the U.S. In addition to handling cases from trial through state or federal appeals, Jeff serves as amicus counsel in advancing legal rules to support his clients’ vital interests.
	Jay Myers Jay assists clients in heavily regulated industries, including health care, energy, insurance, emerging industries, and data privacy. He provides both regulatory legal advice and government relations strategies. Jay’s past and current clients include Fortune 10 companies, startups, nonprofits, industry associations, and advocacy groups. Recognizing that state government matters are often complex and multifaceted, he utilizes regulatory guidance, government advocacy, or both in tandem to deliver tailored solutions for each client’s unique needs.
	Jessica Birdsong Jessica is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, magna cum laude, where she served as associate articles editor of the Journal of Law & Technology.
	Blake R. Christopher Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries.
	Nick Gouverneur Nick is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. He received his J.D. from the University of Illinois College of Law, where he served as a member of the Journal of Law, Technology & Policy.
	Troy Homesley Troy is an accomplished litigator who has represented and defended clients across a wide range of complex, high-stakes disputes at both the trial and appellate levels. He has represented technology companies, business executives, law firms, investment funds, high-ranking federal officials, international non-profits, and asylum seekers. Troy draws on his broad litigation experience to advise clients before litigation arises, while claims are pending or threatened, and leading up to and through trial and appeals.
	Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. Nam’s experience transcends multiple industries, including financial services, telecommunications, media, and sports betting.
	Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
	Philip Nickerson Philip represents clients in sectors such as financial, tech, real estate, and energy in a range of litigation matters. He is experienced in matters involving trade secrets, government investigations, commercial contracts, construction and product defect.
	Lane Page Lane specializes in federal and state regulatory investigations and complex civil litigation. He focuses on representing financial institutions and other businesses, with a particular emphasis on consumer protection and fair lending issues.
	Dascher Pasco Dascher is an attorney within the Regulatory Investigations, Strategy, and Enforcement practice, based in the Richmond office. She joined our firm after working in personal injury and medical malpractice for a Virginia trial law firm. Dascher brings varied legal experience to the firm with strong litigation and regulatory strategy capabilities.
	Kyara Rivera Rivera Kyara is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, cum laude, where she served as publications and online editor of the Public Interest Law Review.
	Timothy Shyu Timothy is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group.
	Trey Smith Trey focuses his practice on representing and advising regulated utilities before state public utility commissions. He routinely helps clients obtain certificates of public convenience and necessity for transmission infrastructure. In this role, Trey works with his clients’ subject-matter experts to manage administrative proceedings, including by preparing initial filings; responding to discovery requests; drafting rebuttal testimony; and litigating any disputed issues.
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	Cole White Cole is a member of the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) group. He has a decade of experience working in the attorney general community, having joined the firm from the Wyoming Office of the Attorney General, where he was assistant attorney general.
	Stephanie Kozol Stephanie is Troutman Pepper Locke’s senior government relations manager in the state attorneys general department.