The state of Massachusetts filed a lawsuit against prediction market Kalshi last week, alleging the platform was conducting illegal sports betting.
Massachusetts Attorney General Andrea Joy Campbell stated that sports wagering comes with significant risk and must be strictly regulated by the state to mitigate public health consequences.
“This lawsuit will ensure that if Kalshi wants to be in the sports gaming business in Massachusetts, they must obtain a license and follow our laws. I am grateful for the ongoing partnership with the Gaming Commission.”
Massachusetts Gaming Commission Chair Jordan Maynard claimed that prediction platforms were neglecting age restrictions and dodging taxes while lauding the AG’s enforcement action.
The claims are that Kalshi is operating an online exchange to offer sports wagering, including moneyline contracts, point spread contracts, and over-under contracts.
Massachusetts states that Kalshi has “neither applied for nor received a Massachusetts sports wagering license from the MGC, as required by law.”
The Attorney General has petitioned the state court to order Kalshi to cease offering sports wagering in Massachusetts.
Last month, Robinhood (NASDAQ:HOOD), a modern brokerage that blends Tradfi with crypto and more, partnered with Kalshi to offer sports betting. The platform has been offering NFL and college football outcome trading, where the transaction is settled using the Kalshi platform.
At that time, Robinhood noted that the offering was different than going through sportsbooks as these trades are executed on Kalshi’s federally regulated exchange and treated like commodities, not wagers.
Massachusetts apparently disagrees with this claim.
Robinhood has petitioned federal courts to block Massachusetts’ attempt to block operations in the state, according to reports.
The legal battle pits the CFTC and its federal authority to regulate Kalshi, as opposed to Massachusetts’ claims that event-driven marketplaces are merely online sports wagering, which contradicts state law.
Notably, Massachusetts has a long history of pursuing sometimes obtuse legal cases, such as its attempt to shut down Regulation A, a federal securities exemption updated under the JOBS Act of 2012. After a long battle, Massachusetts lost its case.
Even more interesting is that the state of Massachusetts sought to block the IPO of Apple within the state, as the state deemed it too risky. We all know how that went.