Kalshi Sues First, Rhode Island Responds With Illegal Betting Lawsuit

Kalshi moved quickly to protect its platform, filing a federal lawsuit against Rhode Island officials before the state could act. 

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The company argued that regulators had already signaled their intent to pursue enforcement, leaving “little doubt” that action was coming unless Kalshi stopped offering event contracts. In its complaint, Kalshi recalled a May 20 meeting where officials refused to give any assurances.

“When Kalshi sought assurances that the Rhode Island Attorney General did not intend to bring an enforcement action against Kalshi, the Attorney General made clear that Kalshi would not receive any advanced notice before the state filed an enforcement action against the company,” the complaint stated. 

Kalshi pointed to earlier remarks from Rhode Island Lottery Director Mark Furcolo, who described the state’s investigation into prediction markets as “very active.” The company warned, according to Gambling Insider, that such enforcement risks creating the “patchwork of state‑by‑state regulation Congress sought to prevent.” 

State strikes back, says prediction markets are “are harming Rhode Islanders’ mental and financial well-being”

In response to the Kalshi suit, Rhode Island Attorney General Peter Neronha filed suit against Kalshi and Polymarket hours later, accusing the platforms of running illegal sports betting operations under the guise of prediction markets.

Neronha’s complaint seeks an injunction that would stop the sites from offering bets on sporting events, arguing that their “event contracts” are simply sports bets by another name. “There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” he said. 

The Attorney General stressed that Rhode Island law and its constitution place strict controls on gambling, and that the companies are attempting to sidestep those rules.

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State officials also warned of wider harm, noting that by bypassing the regulated system, the platforms cut into Sportsbook RI’s business and reduce state revenue. More importantly, they argue, the sites contribute to problem gambling. “By circumventing Rhode Island State law, we allege that Kalshi and Polymarket are harming Rhode Islanders’ mental and financial well-being,” the release stated.

Rhode Island expands sports betting market 

The lawsuit comes barely a week after Bally’s secured Rhode Island’s second online sportsbook license, ending the monopoly held by IGT’s Sportsbook Rhode Island since 2019. Bally’s is expected to launch its platform in November, once IGT’s exclusive deal expires, marking a major expansion of the state’s gambling market.

The Rhode Island Lottery opened applications late last year, but only Bally’s and Rush Street Interactive submitted bids.

After review, Bally’s was chosen, with Deputy Director Michael O’Rourke noting that officials had hoped for more applicants but did not receive them. Despite the steep revenue split, 51% of online sports betting revenue goes directly to the state, Bally’s welcomed the opportunity, already operating the state’s two casinos in Lincoln and Tiverton.

Under the new arrangement, Bally’s will claim the full 49% share as both the online operator and physical sportsbook provider. Lottery figures show online betting generated $26.7 million between last July and March, with the state’s portion amounting to about $13.6 million.

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