Rhode Island Moves to Block Prediction Markets Through Litigation

Rhode Island, the 17th state to take legal action against operators

Another state has entered the growing fight against sports prediction markets.

Rhode Island Attorney General Peter F. Neronha filed lawsuits against Kalshi and Polymarket on Thursday. In it, he alleges the operators’ sports contracts were indistinguishable from wagers placed with sportsbooks. As a result, state law requires they obtain a license to join Rhode Island's sports betting market.

“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” Neronha shared in a press release. “The problem here is that Rhode Island State law heavily regulates gambling, for good reason, and we allege that Kalshi and Polymarket are evading our laws. And Rhode Islanders are losing out.

The lawsuit makes Rhode Island the seventeenth state to take legal action against sports prediction market operators. The growing bipartisan effort has been turning up the pressure on the industry, but not without retaliation.

Kalshi quickly responded by filing its own lawsuit against the AG, accusing him of violating the Commodity Exchange Act. This law places prediction markets under federal regulation by the Commodity Futures Trading Commission. 

Polymarket has yet to take any retaliatory action against the AG or the state.

CFTC Lawsuit Likely Coming

Polymarket could soon file its own lawsuit, but the operator may have reason to hold off. That’s because of the CFTC, which has filed lawsuits against several states that have taken action against prediction markets. The federal regulator carries significant sway in US courts, effectively serving as a shield for operators.

While Rhode Island is a small market, the CFTC has exclusively targeted Democrat-led states (Arizona, Illinois, Connecticut, Minnesota, New York, and Wisconsin. That state’s leadership, including Neronha, falls into the category. Considering voters in the state are unlikely to change that, the small market would be an easy target for the federal regulator.

Regardless of how the CFTC responds, the fight in Rhode Island is likely to be decided by rulings from the dozens of ongoing lawsuits challenging the federal regulation of prediction market apps in US.