Kalshi is facing a wave of lawsuits on nearly every front of American gambling and financial law. State attorneys general, tribal nations, and consumers have sued the prediction market platform for running what they call unlicensed sports betting, while the Commodity Futures Trading Commission has sued states back to defend it. As of mid-2026, roughly 20 states are in active litigation with Kalshi or related platforms, and the appellate courts have started splitting on the central question: are Kalshi’s “event contracts” federally regulated swaps, or illegal gambling dressed up in financial language?1CNBC. CFTC Sues Kentucky Over Actions Against Prediction Markets
Why Kalshi Is Being Sued
Kalshi is a New York–based platform licensed by the CFTC as a designated contract market. In January 2025 it expanded into sports, and by early 2026 roughly 90% of activity on the platform was sports-related, generating what the Financial Times estimated at $1.3 billion in annualized revenue, nearly 90% of it from sports betting fees.2Wisconsin DOJ. State of Wisconsin v. Kalshi Complaint3NPR. Lawsuits and Prediction Market Kalshi
State regulators view the platform as an unlicensed sportsbook operating without paying licensing fees or taxes and without state-required consumer protections like age verification. Kalshi’s position is that its contracts are federally regulated swaps and that the Commodity Exchange Act preempts state gambling law. That preemption argument is the fault line running through every case.
State Lawsuits Against Kalshi
Officials in at least 11 states have issued cease-and-desist orders, and many have followed with formal litigation.4Stateline. Kalshi and Polymarket Are Skirting Laws on Sports Betting, States Say The outcomes so far are uneven.
New Jersey
Kalshi’s biggest win. After New Jersey’s Division of Gaming Enforcement sent a cease-and-desist in February 2025, Kalshi sued and won a preliminary injunction from Judge Edward S. Kiel in April 2025, subject to a $100,000 bond. On April 6, 2026, the Third Circuit affirmed 2-1, holding that the Commodity Exchange Act preempts New Jersey law because Kalshi’s contracts qualify as “swaps” traded on a CFTC-licensed market. Judge Jane Roth dissented, writing that Kalshi’s products were “virtually indistinguishable from the betting products available on online sportsbooks” and that the “event contracts” label amounted to a “performative sleight.”5CNBC. New Jersey Cannot Regulate Kalshi’s Prediction Market, U.S. Appeals Court Rules6U.S. Court of Appeals for the Third Circuit. KalshiEX LLC v. New Jersey, No. 25-1922
Arizona
Arizona went the furthest of any state. On March 17, 2026, Attorney General Kris Mayes filed a 20-count criminal complaint in Maricopa County Superior Court: 4 counts of election wagering and 16 counts of unlawful betting and wagering, all misdemeanors. No individual executives were charged. Kalshi called the charges “seriously flawed” and asked a federal court to block them, but Judge Michael Liburdi denied a temporary restraining order.7CNBC. Arizona Kalshi Criminal Misdemeanor Charges8NPR. Kalshi Criminal Charges Arizona
Massachusetts
Attorney General Andrea Campbell sued in September 2025, alleging Kalshi offered unlicensed moneyline, point-spread, over-under, and proposition bets without the required Massachusetts Gaming Commission license. A Suffolk Superior Court judge granted a preliminary injunction in January 2026 blocking Kalshi from taking sports wagers from Massachusetts customers. The Massachusetts Supreme Judicial Court heard oral arguments on May 4, 2026, and a decision is expected within months.9Massachusetts AGO. AG Campbell Secures Court Order That Will Block Kalshi From Offering Unlawful Sports Wagers in Massachusetts10Commonwealth Beacon. Clash With Prediction Market Giant Kalshi Reaches SJC
Nevada
Kalshi first won an injunction against the Nevada Gaming Control Board from U.S. District Judge Andrew Gordon, then lost it. In November 2025, Judge Gordon reversed and ruled the contracts were gambling subject to state regulation. Kalshi appealed, and the Ninth Circuit consolidated the case with related appeals by Robinhood and Crypto.com. At April 16, 2026 oral arguments, the panel appeared to lean toward Nevada. Judge Ryan Nelson said, “The language says it can’t go up (on the platform). I don’t know how you can read it differently.”11Nevada Current. Ninth Circuit Panel Appears to Lean Nevada’s Way in Legal Battle With Kalshi, Crypto.com
Maryland, Ohio, and Tennessee
A federal judge in Maryland ruled against Kalshi in the summer of 2025, and the Fourth Circuit heard oral arguments on May 7, 2026. Judge Stephanie Dawn Thacker remarked from the bench, “This just seems like gambling.”12National Law Journal. “Basically Gambling” — 4th Circuit Questions Kalshi’s Anti-State Regulation Claim Kalshi lost in Ohio but won in Tennessee, creating a split inside the Sixth Circuit. Those cases were consolidated for oral argument on July 30, 2026.13CourtListener. KalshiEX LLC v. William Orgel Docket
Washington
On March 27, 2026, Washington Attorney General Nick Brown sued Kalshi in King County Superior Court, alleging violations of both the Washington Gambling Act and the Consumer Protection Act. The suit seeks to halt operations in the state, recover money lost by Washington residents, and impose civil penalties.14Washington AGO. Washington Sues Online Betting Platform Kalshi for Illegal Gambling
Wisconsin
Wisconsin Attorney General Josh Kaul filed suit on April 23, 2026, in Dane County Circuit Court and named not only Kalshi but Robinhood, Coinbase, Polymarket, and Crypto.com. The complaint alleges an illegal public nuisance, calls the event contracts “indistinguishable from an ordinary sports bet,” and likens the platforms’ fee structures to a casino’s rake.2Wisconsin DOJ. State of Wisconsin v. Kalshi Complaint
Illinois
Illinois set a July 1, 2026 deadline for prediction market operators to obtain a $15 million sports betting license and pay state taxes. Kalshi filed a preemptive lawsuit on June 23, 2026, seeking a temporary restraining order.15Capitol News Illinois. Prediction Market Kalshi Sues Illinois Over Its Push to Regulate Sports Bets
The CFTC Is Suing States to Defend Kalshi
In an unusual counter-front, the CFTC, under Chairman Michael Selig, the sole sitting commissioner on a body with four vacancies, has been suing states directly. On April 2, 2026, the agency filed against Arizona, Connecticut, and Illinois, seeking declaratory and injunctive relief to block state enforcement. In the Arizona case, it specifically sought to halt the criminal prosecution.16CFTC. CFTC Files Lawsuits Against Arizona, Connecticut, and Illinois17CFTC. CFTC Files Motion for Preliminary Injunction Against Arizona
On April 28, 2026, five days after Wisconsin sued Kalshi, the CFTC sued Wisconsin. Selig said, “States cannot circumvent the clear directive of Congress… if you interfere with the operation of federal law in regulating financial markets, we will sue you.”18CFTC. CFTC Files Lawsuit Against Wisconsin By June 2026, the agency had sued nine states, most recently Kentucky.1CNBC. CFTC Sues Kentucky Over Actions Against Prediction Markets Wisconsin’s Kaul called it “federal overreach.”19Courthouse News Service. CFTC Sues Wisconsin Gaming Administration in Response to Kalshi Crackdown In April 2026, a bipartisan coalition of 38 state attorneys general filed an amicus brief in the Massachusetts case defending state authority to regulate gambling.20New York AGO. Attorney General James Joins Bipartisan Coalition Defending States’ Gambling Laws
Tribal Nation Lawsuits
Tribal gaming operations run on exclusive compacts with states, and tribes have brought their own suits under the Indian Gaming Regulatory Act. In August 2025, the Ho-Chunk Nation of Wisconsin sued Kalshi and Robinhood in the U.S. District Court for the Western District of Wisconsin, alleging the platforms offered unauthorized Class III gaming on tribal lands. On May 11, 2026, Judge William M. Conley let the IGRA claims proceed, finding a “likelihood of success on the merits,” but dismissed the tribe’s RICO and Lanham Act claims and denied a preliminary injunction for lack of irreparable harm. Robinhood was dismissed as a defendant.21Courthouse News Service. Ho-Chunk Nation v. Kalshi, Order on Motions to Dismiss
In May 2026, three New Mexico pueblos and the Mescalero Apache Tribe filed a separate suit in the U.S. District Court in Albuquerque, alleging Kalshi conducts illegal gaming on tribal land in violation of the IGRA and tribal-state compacts. That case is awaiting scheduling orders.22KRQE. Pueblos and Tribe Sue Kalshi, Say Their Online Sports Betting Is Illegal on Tribal Land
Consumer Class Actions
Pelayo v. Kalshi
Filed November 26, 2025 in the U.S. District Court for the Southern District of New York (Case No. 1:25-cv-09913), Pelayo is the first major consumer class action against the platform. It alleges Kalshi operates unlicensed sports gambling and deceives users into thinking they are betting peer-to-peer when they are often betting against “the House,” meaning Kalshi’s own market-making affiliate, Kalshi Trading LLC, and partners like Susquehanna International Group. The plaintiffs seek a nationwide class plus subclasses covering Washington, D.C. and 30 states, with a jury trial and potentially trebled damages. Kalshi has called the suit “meritless fiction.”23Front Office Sports. Kalshi Hit With Nationwide Class Action Over Illegal Sports Betting24ClassAction.org. Pelayo et al v. Kalshi Inc. et al, Complaint
Risch v. KalshiEX (the Khamenei “Death Carveout” Case)
Filed March 5, 2026 in the U.S. District Court for the Central District of California (Case No. 2:26-cv-02390), this proposed class action comes out of a $54 million prediction market on whether Iranian Supreme Leader Ali Khamenei would leave power by specific dates. After widespread reports of his death on February 28, 2026, Kalshi declined to pay “yes” positions, citing a “death carveout” in its contract terms the plaintiffs say was inadequately disclosed. The suit alleges breach of contract and violations of California consumer protection laws. Kalshi CEO Tarek Mansour said the company reimbursed users’ net losses at a cost of $2.2 million.25Bloomberg Law. Kalshi Sued Over Death Carveout in Iran Leader Prediction Market26Forbes. Kalshi Death Bet Lawsuit Sparks Push to Ban Assassination Markets
Where the Litigation Is Headed
The appellate map is now split. The Third Circuit ruled for Kalshi. District courts in Nevada, Maryland, and Ohio ruled against it. The Fourth, Sixth, and Ninth Circuits all have pending appeals, and the panels in Nevada and Maryland sounded skeptical of Kalshi at argument. Legal experts widely expect the split to push the question to the Supreme Court, potentially by 2027.27Fortune. Kalshi Supreme Court Sports Betting Prediction Markets Until one of those courts, or Congress, settles whether an event contract on a game is a swap or a bet, Kalshi will keep litigating in parallel across nearly every venue where it operates.