Rhode Island challenges Kalshi prediction market operations

Kalshi filed a lawsuit in the U.S. District Court for the District of Rhode Island against state officials, alleging efforts to block its federally regulated prediction market through threatened gambling enforcement. The complaint names Attorney General Peter F. Neronha, Division of State Lottery Director Mark Furcolo, and Gaming and Athletics Administrator Christina Tobiasz. Kalshi said Rhode Island intends to prohibit Kalshi from operating and that this intrudes on the federal framework Congress created for regulating derivatives trading on federally designated exchanges. Kalshi operates a prediction market platform regulated by the Commodity Futures Trading Commission, with contracts tied to election outcomes, economic data, weather events, and sports results. Kalshi argued these contracts are federally regulated derivatives rather than illegal gambling under state law. Kalshi also alleged that during a May 20 meeting, the attorney general’s office questioned compliance with state gaming laws and refused to provide advance notice before enforcement action.

"Rhode Island's stated intent to prohibit Kalshi from operating intrudes upon the federal framework that Congress established for regulating the trading of derivatives on federally designated exchanges. Kalshi runs a prediction market platform regulated by the Commodity Futures Trading Commission, or CFTC. Customers trade contracts tied to election outcomes, economic data, weather events, and sports results. The company argues those products are federally regulated derivatives rather than illegal gambling activity under state law."

"When Kalshi sought assurances that the Rhode Island Attorney General did not intend to bring an enforcement action against Kalshi, the Attorney General made clear that Kalshi would not receive any advanced notice before the state filed an enforcement action against the company. According to the complaint, tensions rose during a May 20 meeting between Kalshi representatives and Rhode Island officials. Kalshi said the attorney general's office questioned whether the exchange complied with state gaming laws and declined to promise advance warning before enforcement action."

"Kalshi sued Rhode Island officials on Thursday (May 21), accusing the state of trying to block its federally regulated prediction market business through threatened gambling enforcement. The complaint landed in the U.S. District Court for the District of Rhode Island and immediately escalated a widening national fight over sports-related event contracts. The lawsuit names Rhode Island Attorney General Peter F. Neronha, Division of State Lottery Director Mark Furcolo, and Gaming and Athletics Administrator Christina Tobiasz."

Read at ReadWrite