Rhode Island's Attorney General, Peter F. Neronha, has initiated legal proceedings against prediction market operators Kalshi and Polymarket, asserting that their sports event contracts contravene state gambling regulations by functioning similarly to traditional sports betting.
This lawsuit, lodged in the Rhode Island Superior Court, represents a significant development in the ongoing legal conflict between various U.S. states and prediction market platforms that offer contracts linked to sporting events and player performances.
Neronha stated in a press release, “There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that.” He emphasized that Rhode Island's gambling laws are stringent for a reason, alleging that both companies are circumventing these regulations.
The complaint highlights that the contracts provided by these platforms closely resemble sports bets, as users can take “yes” or “no” positions on actual outcomes, earn fixed payouts for accurate predictions, and trade contracts related to games and player performances.
“The similarities are clear: Kalshi and Polymarket operate, appear, and function like gambling entities because they are indeed gambling,” the complaint asserts.
This legal action follows a preemptive lawsuit from Kalshi aimed at blocking potential enforcement actions by Rhode Island. Kalshi's filing states, “The Rhode Island Attorney General refused to provide any assurances that the state would refrain from enforcement,” indicating that the state views Kalshi’s event contracts as illegal and is poised to act against the company.
Rhode Island contends that prediction markets are detrimental to state gaming revenues and consumer protections, noting an 8% decline in sports wagers from 2024 to 2025.
Neronha pointed out that these platforms evade the tax obligations that licensed online sportsbooks are subject to, stating, “While these private companies continue to profit significantly from hardworking individuals, the state’s third-largest revenue stream is adversely impacted, resulting in less funding for essential programs that support Rhode Islanders daily.”
Furthermore, the lawsuit claims that Kalshi and Polymarket do not have the necessary safeguards that licensed sportsbooks must implement, which could lead to increased gambling-related issues.
Neronha added, “We allege that these platforms provide easy access to those vulnerable to gambling problems, heightening the risk of severe gambling addiction consequences.”
Rhode Island seeks a court ruling declaring that these companies are facilitating gambling under state law, along with a permanent injunction, restitution, and disgorgement.
Kalshi is also under scrutiny in other states, including Arizona, Massachusetts, Michigan, Nevada, and Washington. Earlier this month, U.S. District Judge John C. Coughenour sent Kalshi’s lawsuit in Washington back to state court, asserting that gambling regulation is a “state issue.” Kalshi had previously sought to transfer the case to federal court.
In Arizona, Attorney General Kristin Mayes has filed misdemeanor charges against Kalshi, claiming the company operated an illegal gambling business without a license, although state action is currently halted by an injunction.