A Massachusetts federal judge has issued a preliminary injunction prohibiting prediction market platform Kalshi from accepting sports wagers from state residents, marking a significant setback for the startup's expansion plans.
A U.S. District Court judge in Massachusetts has granted a preliminary injunction against prediction market platform Kalshi, effectively blocking the company from allowing Massachusetts residents to place sports bets through its platform. The ruling, issued Tuesday, represents a significant regulatory setback for the New York-based startup that had been expanding its event-based wagering operations nationwide.
The case centers on whether Kalshi's prediction markets constitute illegal sports gambling under Massachusetts law. State regulators argued that Kalshi's platform enables users to effectively bet on sports outcomes through contracts tied to game results, which would violate the state's strict gambling regulations. Kalshi countered that its markets are financial instruments rather than gambling products, falling under the regulatory purview of the Commodity Futures Trading Commission (CFTC), which approved its operations in 2022.
Judge Indira Talwani's ruling sided with Massachusetts regulators, finding that the state demonstrated a likelihood of success in proving that Kalshi's operations constitute illegal gambling under state law. The injunction prohibits Kalshi from "letting state residents bet on sports through its online platform" while litigation continues. Court documents reveal that Massachusetts officials presented evidence showing substantial resident participation in Kalshi's sports-related markets, with over $110 million in wagers placed by state residents in recent months.
Kalshi, founded in 2018 by MIT graduates, operates prediction markets where users trade contracts based on the outcome of real-world events ranging from economic indicators to entertainment awards. The company had positioned its sports markets as distinct from traditional sportsbooks by emphasizing their "event contract" structure and $25,000 maximum payout limit per user. However, the court found these distinctions insufficient to bypass Massachusetts' gambling prohibitions.
The ruling highlights ongoing tensions between innovative fintech platforms and state gambling regulators. Massachusetts maintains one of the nation's most restrictive gambling frameworks, with only three licensed casino operators authorized to offer sports betting. State officials argued that unregulated platforms like Kalshi undermine consumer protections and tax revenue streams, pointing to the state's 20% tax rate on licensed sports betting revenue.
Legal experts note the decision could influence similar cases nationwide as prediction markets expand. Kalshi may appeal the injunction to the First Circuit Court of Appeals, where the fundamental question of whether prediction markets constitute gambling or financial instruments remains unresolved. The case continues as litigation proceeds toward trial.
For Massachusetts residents, the injunction means immediate loss of access to Kalshi's sports markets. The company's non-sports prediction markets remain available nationwide under CFTC oversight. Kalshi's legal team indicated they're "evaluating all options" while emphasizing their commitment to compliant operations.
Court documents: Massachusetts District Court Docket Kalshi's regulatory position: CFTC Approval Documentation Massachusetts gambling regulations: Massachusetts Gaming Commission
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