Massachusetts Doubles Down on Anti-Prediction Markets Rhetoric

Suffolk County Superior Court Judge Christopher Barry-Smith has become the latest legal expert in Massachusetts to question whether prediction market platforms, such as Kalshi, could be allowed to operate legally in the Bay State.

Kalshi Faces New Pressure in Massachusetts as State Presses On

Commenting on the matter, Judge Barry-Smith explored a familiar argument, arguing that Kalshi is de facto offering “unlicensed sports wagering”  and bringing an “addictive product” to people as young as 18.

Massachusetts is now seeking an injunction to force Kalshi to discontinue its product offering, which the state labels as unregulated gambling. Regulated companies, though, have embraced the segment – from DraftKings to FanDuel, to most recently, Fanatics.

Kalshi has opposed such qualifications, arguing that it is regulated under the Commodity Futures Trading Commission (CFTC) and that its portfolio is based on financial products, not sports gambling.

This is precisely what Kalshi lawyer Grant Mailand argued in front of Judge Barry-Smith, maintaining that sports event contracts are different from traditional sports gambling markets, and pointing out the CFTC regulatory framework.

Judge Barry-Smith, though, seemed to disagree, arguing that the argument would not sound too credible to a layperson, and seeming to hint that what was at stake was the legal definition of sports event contracts.

Classify them as gambling, and they instantly become a violation of gambling laws. Nod agreement to CFTC’s exclusivity of their regulation, and then you allow a product that resembles traditional sports gambling.

Assistant AG Lousia Castrucci has similarly chimed in and argued that the original mandate given to the CFTC by Congress was specifically to ensure that the 2008 financial calamity did not repeat itself, not to introduce a form of sports bets.

Massachusetts Attacks Kalshi’s Main Argument about CFTC Regulation

Kalshi has been pushing hard against the tide of gambling regulators, but a recent Nevada setback could be the first of more similar developments to come. Nevada also fears that Kalshi may not stop at sports event contracts.

A Nevada judge engaged with Kalshi’s argument, attempting to redefine sports betting and how Kalshi’s products are different, and ultimately said that sports matches cannot be treated as “events” based on federal laws.

With the legal tug-of-war continuing, it is very likely that Kalshi would need to bring matters in front of the Supreme Court of the United States. At the same time, Kalshi has gone increasingly mainstream, with the company signing data partnerships with both CNN and CNBC only recently.