Kalshi is going to court in the Bay State.
Massachusetts Attorney General Andrea Joy Campbell announced Friday she has filed a lawsuit against the prediction market for promoting and accepting online sports wagers from Massachusetts customers without following the many state laws that govern sports gaming, including licensing by the Massachusetts Gaming Commission (MGC).
Key Takeaways
- Massachusetts AGO files 43-page lawsuit against Kalshi.
- Requests Kalshi to cease offering services in the state pending litigation.
- Bay State becomes fifth state to order cease-and-desist against Kalshi.
As part of the 43-page filing, the AGO is requesting that the court order Kalshi to cease offering its sports services in the state while the lawsuit is pending.
Ironically, Kalshi – the first CFTC regulated exchange dedicated to trading on the outcome of future events – was founded seven years ago by Tarek Mansour and Luana Lopes Lara, who met while studying at the Massachusetts Institute of Technology (MIT).
“Sports wagering comes with significant risk of addiction and financial loss and must be strictly regulated to mitigate public health consequences,” said Campbell in the release. “This lawsuit will ensure that if Kalsi 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.”
The AGO alleges that Kalshi uses an online “exchange” to offer sports wagering, under the guise of “event contracts,” which allow bettors to place wagers through a “yes” or “no” option on the likelihood of whether an event will occur. Kalshi has also begun offering standard sports betting features, such as “event contracts” on money lines, point spreads, and point totals.
It has been argued that those markets resemble sports wagers that are offered by licensed legal sportsbooks. According to the AGO, Kalshi has neither applied for nor received a Massachusetts sports wagering license from the MGC, which is required by law.
For example, Kalshi users starting at the age of 18 can use the platform, while the legal age for sports wagering in the state is 21. They do not offer any "self-limit" options or any educational resources for their users.
“Prediction market companies are expanding into sports wagering while neglecting age restrictions, player protection programs, state taxes, and other consumer protections. My fellow commissioners and I appreciate the Attorney General’s efforts to enforce the law and hold these companies accountable to Massachusetts’ rigorous standards,” said MGC chair Jordan Maynard. “We look forward to our continued partnership with Attorney General Campbell and her office.”
Volatile industry
Prediction markets have been the topic of discussion and mired in lawsuits over the last few months.
The aforementioned Kalshi has received cease-and-desist orders from five states: Massachusetts, Arizona, Illinois, Montana, and Ohio. There is also on-going litigation against New Jersey in the U.S. Court of Appeals for the Third Circuit and remains litigation in Maryland and Nevada.
Other companies also have included ForecastEx, Polymarket, PredictIt, and Robinhood.
