Rhode Island has launched legal action against prediction market operators Kalshi and Polymarket, arguing that their sports-related event contracts amount to gambling under state law. The case, filed in Rhode Island Superior Court by Attorney General Peter Neronha, seeks to prevent the platforms from offering contracts tied to sports outcomes within the state.
The lawsuit comes as Kalshi separately filed a federal court action in Rhode Island, aiming to block state enforcement efforts before they take effect. The parallel filings reflect an escalating dispute over whether prediction markets fall under state gambling regulations or federal financial oversight.
State officials argue that the platforms enable users to place monetary positions on sporting outcomes through contracts structured as binary choices. Users purchase “yes” or “no” positions and receive fixed payouts if their predictions are correct, with no return if they are wrong. According to the state, these instruments mirror traditional sports betting despite being labeled differently.
State Says Contracts Mirror Sports Betting
Rhode Island’s complaint claims Kalshi and Polymarket enable wagering on sports and player performance that functions similarly to sportsbooks. Officials argue that renaming wagers as “event contracts” does not change their substance.
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” Neronha said in a news release. “The problem here is that Rhode Island State law heavily regulates gambling, for good reason, and we allege that Kalshi and Polymarket are evading our laws.”
The filing says sports betting in Rhode Island is limited to a state-controlled system, and that prediction markets operate outside this structure, undermining regulation and tax revenue.
Neronha said: “While these private companies continue to profit exponentially off hard-working people, the State’s third largest revenue stream is detrimentally affected, which means less money to fund critical parts of programs that serve Rhode Islanders every day.”
Officials also argue that wider access to prediction markets increases gambling-related harm due to weaker consumer protections.
Legal Dispute Over Jurisdiction Continues
Kalshi argues its event contracts are federally regulated financial derivatives under the Commodity Futures Trading Commission, not state gambling products, placing them beyond state authority.
Prediction markets have expanded into sports, becoming a major driver of user activity. Kalshi says these contracts also allow market participants to hedge exposure tied to sports outcomes across industries such as media and sponsorship.
The Rhode Island case reflects broader disputes in multiple states over whether prediction markets fall under gambling regulation or financial oversight.
State Seeks Ban and Financial Remedies
Rhode Island is seeking a permanent injunction to stop Kalshi and Polymarket from offering sports contracts and a declaration that their activity falls under state gambling law.
The state also seeks restitution and disgorgement of profits linked to the operations, along with claims that prediction markets operate outside Rhode Island’s regulated sportsbook system, reducing oversight and tax contributions.
Source:
“Rhode Island AG Sues Prediction Platforms Kalshi And Polymarket”, patch.com, May 22, 2026
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