Prediction market cases advance as governors weigh gambling bills

Courts in Rhode Island and Connecticut scheduled hearings this week in disputes over prediction markets while governors in Colorado and Louisiana consider pending gambling legislation.

In Rhode Island, Kalshi sued the state in federal court and asked for a temporary restraining order and preliminary injunction. A hearing on that request is scheduled for May 26 before U.S. District Judge Mary S. McElroy. Separately, Rhode Island filed state-court claims against Kalshi and Polymarket; Polymarket removed the state suit to federal court. The state is likely to file a motion to remand the Polymarket case back to state court, a filing that would determine whether the matters proceed in state or federal court.

In Connecticut, the Commodity Futures Trading Commission sued to challenge the state’s restrictions on prediction markets. U.S. District Judge Vernon D. Oliver set a telephonic prefiling conference for May 27 to consider the defendants’ proposed motion to dismiss, a pending motion to intervene, and the parties’ anticipated Rule 26(f) report. That conference will help establish schedules for dispositive motions and any intervention filings.

Washington state recently won a procedural ruling that sent a Kalshi case back to state court and had the Ninth Circuit deny Kalshi’s request for a stay. With those rulings, Washington regulators could seek emergency relief in state court, including a temporary restraining order to halt Kalshi’s operations while litigation proceeds. Nevada pursued a similar path after winning remand in its case against Kalshi.

The CFTC has broadened enforcement activity in recent months. The agency sued Minnesota after the state enacted a ban on prediction markets and has filed lawsuits against Arizona, Illinois, New York and Wisconsin. The CFTC has also submitted amicus briefs in cases in several states. Additional CFTC filings or new state cease-and-desist orders remain possible, as do preemptive lawsuits by Kalshi or other prediction-market operators.

In Colorado, Gov. Jared Polis is considering two bills: SB 131 and SB 163. Lawmakers removed an initial ban on proposition bets and a provision barring sportsbooks from limiting certain bettors from the final version of SB 131. The enacted text narrows the bill to responsible-gaming measures, including tighter rules on advertising, restrictions on promotional language and limits on customer deposit amounts. SB 163 would consolidate several gaming regulatory functions within state government and reorganize parts of Colorado’s gaming oversight.

In Louisiana, Gov. Jeff Landry recently signed two sweepstakes-related bills and now has SB 325 and SB 339 on his desk. SB 325 would allow regulators to ban bettors who threaten violence or harm tied to sports wagering. SB 339 would expand background-check requirements for gambling licensing and oversight. The governor’s decisions will determine whether those measures become law.

The legal disputes center on whether state restrictions or bans conflict with federal law governing futures and related trading. The CFTC has argued federal preemption in multiple cases, while states have used civil enforcement and requests for emergency court orders to try to halt platform operations during litigation. The scheduled hearings and pending executive decisions will determine short-term enforcement and regulatory steps.