New York Attorney General Letitia James has jumped into a growing national brawl over prediction markets, lining up with a bipartisan crew of 37 state prosecutors to tell the courts that one of the industry’s biggest players is really just running a sports book in disguise.
The coalition is asking judges to keep Kalshi from offering what it calls “event contracts” tied to sports results, arguing that these products walk, talk and pay out like ordinary sports bets and should be treated as such under state gambling laws. Their brief backs a civil case in Massachusetts and lands in the middle of a broader wave of lawsuits, federal filings and split court rulings that have turned prediction markets into one of the hottest regulatory fights in the country.
According to a press release from the Office of the New York State Attorney General, James joined the multistate amicus brief supporting Massachusetts’ lawsuit against Kalshi. Stressing consumer protection, she warned that “Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers,” a line she also highlighted in a post on X.
What Massachusetts’ suit says
The Massachusetts complaint, filed in September 2025, accuses Kalshi of marketing and taking sports wagers without securing the licenses and consumer safeguards that state law demands. Regulators there say that includes tougher minimum age requirements and protections intended to curb gambling addiction. The Massachusetts Attorney General’s office has laid out the case and related state orders in its own public filings.
Federal regulators and a split court landscape
While the states crack down, the federal picture is anything but settled. A divided federal appeals panel recently ruled that certain event contracts traded on a CFTC-regulated exchange can fall under the Commodity Exchange Act, which would place them within federal oversight and, at least for now, narrow some avenues for state enforcement.
The Third Circuit’s opinion, which is publicly available, details the panel’s view on when federal commodities law can preempt state gambling rules. At the same time, the Commodity Futures Trading Commission, joined by the U.S. Department of Justice, has gone to court against several states, arguing the agency has exclusive authority to police event contracts.
States keep pushing back
State officials are not backing off. In March, Michigan’s attorney general filed a civil suit that claims Kalshi violated that state’s lawful sports betting statute and asks the court to issue an injunction that would shut down the contested activity.
Wisconsin followed suit this week, lodging complaints in Dane County that name Kalshi along with several distribution partners. The filings contend that the platforms are helping run unlicensed sports wagering operations inside the Badger State.
Kalshi’s stance and local traces
Kalshi has consistently responded that its event contracts trade on a designated contract market overseen by the CFTC and are therefore governed by federal derivatives law rather than state gambling codes. Reuters has reported the company’s repeated insistence that it is ready to defend these products as lawful financial innovations in court.
Closer to home, local outlets, including Hoodline, have chronicled earlier dustups involving Kalshi, from controversial payouts to run-ins with state regulators. Taken together, those episodes show how deeply the company’s operations are now entangled with oversight regimes in multiple jurisdictions.
Legal implications and what to watch
At the heart of the fight is a deceptively simple question: when a contract pays out based on how a game turns out, is that a “swap” under federal commodities law or an illegal wager under state gambling statutes? The Third Circuit and other courts are now wrestling with exactly that issue.
With conflicting rulings, dueling lawsuits from federal agencies and an expanding roster of state complaints, the dispute seems primed for a longer appellate run. However it lands, the eventual outcome is likely to decide whether state gambling regulators or the CFTC get the final word on how prediction markets operate across the country.
