Massachusetts Lawsuit Against Kalshi Relocates Back to State Court

• A motion to remand the commonwealth’s lawsuit against Kalshi back to state court has been granted
• It’s a major win for Massachusetts for the lawsuit to be heard in state court and not a federal court
• The decision is not appealable

A lawsuit filed by Massachusetts Attorney General Joy Campbell will be heard in state court, not a federal court, after a judge granted the commonwealth’s motion to remand the lawsuit to Suffolk Superior Court.

The decision is a major win for the commonwealth to have the lawsuit heard in state court. The granted motion is not an appealable one, so the venue for the suit is now set.

The Attorney General’s Office requested an emergency preliminary injunction of Kalshi’s sports event contracts in the state while the lawsuit is being considered, which will now be debated at the state court level.

Massachusetts Struck First

Massachusetts became the first state to levy a lawsuit against Kalshi – and the prediction markets – over its sports event contracts.

The lawsuit alleges Kalshi’s sports event contracts bypass key consumer protections that are required of licensed sports betting operators. Kalshi has not undergone the necessary comprehensive processes required by the MGC to ensure its operations are in alignment with state regulations. Kalshi also allows users between the ages of 18 and 21 to trade contracts on its platforms, when the legal age for sports betting in the state is 21.

According to the state’s lawsuit, Kalshi’s platform employs behavioral design mechanisms drawn from gambling psychology, with features that encourage “impulsive engagement, exploit award anticipation, and diminish users’ perception of financial risk.”

The lawsuit contends approximately 75% of Kalshi’s trading volume has been sports event contracts from May 17, 2025, onwards. From January to June of 2025, the state alleges Kalshi users “wagered more than $1 billion on 3.4 million sports wagers.”

“Despite Kalshi calling its product ‘event contracts,’ consumers are placing wagers on the outcome of sporting events. Kalshi’s sporting event contracts constitute ‘sports wagering’ because Kalshi is engaged in ‘the business of accepting wagers on sporting events.’ Kalshi’s offering meets the definition of a ‘wager’ under Chapter 23N because a user risks a sum of money (i.e. the price of the contract) on an uncertain occurrence in a sporting event (i.e. the position taken on the event contract) for the chance to win money if the event takes place (i.e. a prize),” Massachusetts counsel wrote in the lawsuit.

Counsel for the state requests the court determines Kalshi is engaged in sports betting without a license in violation of state law, to award monetary relief in an amount to be determined at trial, permanently enjoin Kalshi from engaging in sports betting without a license, and award any and all other additional relief as the court may determine.

Judge Rejects Kalshi Argument

Judge Richard G. Stearns granted the commonwealth’s request to remand the lawsuit back to state court, rejecting Kalshi’s “plain vanilla federal preemption defense.”

Stearns noted in his ruling that Kalshi does not claim Congress clearly intends to supersede state authority with the federal Commodity Exchange Act and its argument is “not a claim of complete preemption.”

“The distinction matters. Complete preemption arises in instances where ‘Congress so strongly intended an exclusive federal cause of action that what a plaintiff calls a state law is to be recharacterized as a federal claim.’ It is ‘a narrow exception to the well-placed complaint rule,’ and applies only where the defendant can show clear Congressional intent to displace state regulation…The court discerns no such clear intent in the CEA or its legislative history. Accordingly, the case is remanded to the Massachusetts Superior Court for Suffolk County,” Stearns wrote.