Kalshi, Rhode Island AG File Dueling Lawsuits Over 51% Sports-Betting Take
Updated
Updated · Turn to 10 · May 21
Kalshi, Rhode Island AG File Dueling Lawsuits Over 51% Sports-Betting Take
2 articles · Updated · Turn to 10 · May 21
Rhode Island Attorney General Peter Neronha sued Kalshi and Polymarket in state court Thursday, alleging their sports-related event contracts amount to illegal sports gambling under state law.
Hours earlier, Kalshi filed in federal court seeking an emergency restraining order and injunction, saying Rhode Island was poised to shut down its federally regulated prediction-market service without advance notice.
Kalshi said the threat escalated after a Wednesday meeting with Neronha’s office and an early-May confirmation that state staff were investigating the company; the suit also names lottery and gaming officials.
The clash centers on whether event contracts are federally regulated trading products or state-regulated bets, with Rhode Island arguing the platforms infringe on its control of games of chance.
The dispute also carries revenue stakes: Rhode Island currently allows only one online sportsbook operator, takes 51% of proceeds, and has approved Bally’s to launch a second platform in November.
With courts divided and states losing millions, who will decide the rules for this trillion-dollar market?
Are prediction markets the future of finance or just Wall Street's version of a sportsbook?
When 70% of traders lose, are these platforms creating investors or a new generation of problem gamblers?
$8 Billion at Stake: The Legal Battle Over Prediction Markets, State Gambling Laws, and the Future of Online Betting in Rhode Island
Overview
In May 2026, a major legal battle erupted when Rhode Island’s Attorney General sued prediction market platforms Kalshi and Polymarket, accusing them of illegal sports gambling. In response, Kalshi filed a federal lawsuit to stop Rhode Island from shutting down its service, arguing it is a federally regulated exchange, not subject to state gambling laws. This clash highlights a deep divide over whether prediction markets are financial instruments under federal oversight or unlicensed gambling under state control. The outcome will shape how prediction markets operate nationwide, as both sides fight for regulatory authority and the future of this fast-growing industry.