29 May 2026
Rhode Island Attorney General Moves Forward With Lawsuit Targeting Kalshi and Polymarket Event Contracts
Attorney General Peter Neronha filed suit in Rhode Island state court against prediction market operators Kalshi and Polymarket, and the complaint alleges that sports-related event contracts on these platforms constitute illegal sports betting along with online casino gaming under state law while also evading the regulated gambling system that Rhode Island maintains.
The filing came after Kalshi had already launched its own federal lawsuit against the state just hours earlier, and that federal action argues the platforms fall under Commodity Futures Trading Commission oversight as derivatives or swaps rather than falling into state gambling jurisdiction. Observers note this sequence of filings highlights the overlapping claims of authority that continue to surface between federal regulators, state attorneys general, and companies operating prediction markets.
Details of the State Court Complaint
The Rhode Island complaint specifies that certain contracts tied to sports outcomes operate outside the state's licensing framework for gambling activities, and it further claims these contracts function in ways that mirror traditional sports betting or casino-style games without paying the required taxes or meeting regulatory standards. Court documents describe how users can place wagers on event results through these platforms, which the attorney general's office contends amounts to unlicensed gambling operations.
State law in Rhode Island requires all sports betting and online gaming to pass through approved channels that include revenue sharing and consumer protections, yet the suit asserts Kalshi and Polymarket have bypassed those requirements entirely. The attorney general's press release outlines specific contract types that reference athletic competitions and argues these fall squarely within the definition of prohibited activity.
Kalshi's Preemptive Federal Filing
Kalshi initiated its federal case in advance of the state action, and the company's complaint emphasizes that the CFTC has already granted regulatory approval for many of its event contracts as financial instruments. According to the federal filing, this oversight places the platforms beyond the reach of state gambling statutes because federal derivatives law preempts conflicting state measures in this area.
The company maintains that its products differ from traditional betting because they involve settlement based on objective outcomes rather than direct wagers against a house, and it points to existing CFTC rules that classify such contracts as swaps. This argument forms the core of Kalshi's request for a court declaration that Rhode Island cannot enforce its gambling laws against the platform.
Background on the Ongoing Jurisdictional Tension
Disputes over whether prediction markets qualify as gambling or as regulated financial products have appeared in multiple states, and the Rhode Island case adds another layer to these conflicts. Polymarket has faced similar scrutiny elsewhere while Kalshi continues to expand its offerings under federal oversight, yet state officials have increasingly questioned whether CFTC approval fully shields these platforms from local enforcement.
The current filings illustrate how companies and states are positioning themselves early in litigation, and each side seeks to establish favorable jurisdiction before broader enforcement actions develop. Data from regulatory filings shows prediction market volumes have grown substantially in recent years, which draws attention from both tax authorities and traditional gambling operators who must comply with state licensing regimes.
Arguments Presented by Each Party
Rhode Island's position centers on protecting the integrity of its regulated gambling market, and the complaint emphasizes that unlicensed operators undermine revenue streams designated for public programs. The attorney general's office cites specific statutory language that prohibits unauthorized sports betting and online gaming regardless of how the activity is labeled by the operator.
Kalshi counters that its CFTC registration creates a uniform national standard, and it argues that allowing states to impose separate gambling rules would fragment the market for event contracts. The federal complaint references prior CFTC no-action letters and rulemakings that approved similar products, and it seeks injunctive relief to prevent Rhode Island from pursuing enforcement while the federal case proceeds.
Polymarket has not issued a separate public response in the immediate aftermath of the state filing, though the company has previously defended its operations as compliant with applicable federal requirements in other jurisdictions. Both companies now face parallel proceedings in state and federal courts that will likely address questions of preemption and the proper classification of event contracts.
Potential Next Steps in the Litigation
Court schedules indicate the federal case may see an early motion hearing within weeks, and the state case could proceed on a parallel track depending on removal requests or stays. Legal analysts expect arguments to focus on whether the contracts at issue qualify as swaps under the Commodity Exchange Act or instead meet the elements of gambling under Rhode Island statutes.
Resolution of these cases could influence how other states approach similar platforms, and the outcome may clarify the boundaries between federal derivatives regulation and state gambling authority. The attorney general's office has indicated it will seek injunctive relief in state court to halt the offering of the challenged contracts to Rhode Island residents during the litigation.
Conclusion
The dual filings between Rhode Island and Kalshi establish competing claims over regulatory authority that courts will need to resolve, and the Polymarket case adds another defendant to the state action. These proceedings reflect broader questions about how prediction markets fit within existing legal frameworks for both financial products and gambling activities. Further developments will depend on judicial rulings regarding federal preemption and the specific nature of the event contracts at issue.