Kalshi sues Rhode Island; state sues Kalshi and Polymarket

Kalshi filed a federal preemptive lawsuit Thursday seeking to block Rhode Island officials from enforcing state gambling laws against its prediction markets. Hours later, Rhode Island Attorney General Peter Neronha filed a separate suit in Rhode Island Superior Court naming Kalshi and Polymarket and alleging their sports-related event contracts amount to illegal sports betting.

Kalshi says it filed the federal complaint after a May 20 meeting with state officials in which it was told its event contracts violated Rhode Island gaming law and was denied assurances that officials would not pursue enforcement. The complaint states the attorney general “made clear that Kalshi would not receive any advanced notice before the state filed an enforcement action against the company.” Kalshi says the threat of enforcement prompted the preemptive filing.

In federal court Kalshi describes its markets as financial instruments with hedging and informational uses. The complaint quotes a Federal Reserve paper that describes Kalshi markets as providing “a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.” The company said it will seek emergency injunctive relief and pointed to prior preemptive suits it filed in Utah and Iowa.

Rhode Island’s state complaint contends sports-related event contracts on Kalshi and Polymarket are structured like sportsbooks and therefore fall under state gambling law. The filing states platforms use yes-or-no positions tied to sports outcomes that, in the state’s view, function as wagers on sporting events.

The state also alleges the platforms include features that encourage gambling, citing leaderboards and real-time displays of how other users place positions. The complaint links those features to problem gambling and to a decline in state betting revenue, noting Rhode Island Lottery officials reported an 8% drop in bets from 2024 to 2025.

Rhode Island seeks declaratory relief, a permanent injunction barring sports-related event contracts in the state, and restitution and disgorgement. The state’s filing was accompanied by a statement from the attorney general that reads, “There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that.”

The filings set up a likely procedural fight over whether the state case will remain in state court or be removed to federal court. Kalshi has sought removal in other states; courts have often granted motions to remand, and remands have allowed regulators to seek preliminary injunctive relief. Kalshi has also won favorable federal rulings on federal preemption in some matters.

Polymarket appears as a defendant only in the state suit; it is not named in Kalshi’s federal complaint. The two lawsuits contribute to ongoing litigation over whether prediction markets are governed by federal law as financial instruments or by state gambling statutes.