Judge bans Kalshi from offering sports-events contracts in Massachusetts in 30 days

By Nate Raymond

BOSTON, Feb 6 (Reuters) – A Massachusetts judge on Friday rejected a request by prediction-markets operator Kalshi to allow it to keep offering sports-events contracts in the state while it appeals an injunction that will lead to it being banned from operating there without a state gaming license in 30 days.

Suffolk County Superior Court Judge Christopher Barry-Smith in Boston declined to stay his injunction, saying the financial consequences it will have on Kalshi’s business do not outweigh the state’s interest in regulating sports gaming operators.

Kalshi, in a statement, said it continues to believe federal law governs its exchange, which is licensed by the U.S. Commodity Futures Trading Commission. “We will stay the course and fight for that belief,” Kalshi said.

GAMING REGULATORS, PREDICTION-MARKET OPERATORS SQUARE OFF

The ruling was the latest development in an escalating nationwide fight between state gaming regulators and prediction-market operators over the legality of allowing residents to place financial bets on the outcomes of sporting events.

The gaming regulators say companies like Kalshi are offering unlicensed sports wagers in violation of laws and regulations in states such as Massachusetts, including those prohibiting anyone under 21 from betting on match outcomes.

A judge in Nevada on Thursday issued an order temporarily blocking Coinbase from doing the same there, after gaming regulators in the state secured a similar order against prediction-market operator Polymarket.

Barry-Smith last month agreed with Massachusetts Attorney General Andrea Joy Campbell, a Democrat, that by allowing residents to place bets on the outcomes of sporting events, Kalshi was operating an unlicensed sports wagering enterprise.

The judge formally entered his preliminary injunction on Friday, which he said Kalshi had 30 days to comply with.

New York-based Kalshi has argued that state gaming laws like Massachusetts’ do not apply to its sports-events contracts, which Kalshi contends the CFTC has exclusive jurisdiction over, given its authority over exchange-traded swaps, a type of derivative contract.

But Barry-Smith said that while the company was welcome to ask an appeals court to lift his injunction, it had presumably prepared for the risk that a judge might reject its arguments for why its business was lawful.

“Kalshi adopted its business model – relying on CFTC regulation of ‘swaps’ to offer nationwide sports betting in contravention of state gaming laws – with eyes wide open,” Barry-Smith wrote.

Campbell, in a statement, said the ruling “affirms Massachusetts’ right to enforce our gambling laws and hold all operators who wish to offer sports wagers in our state accountable.”

(Reporting by Nate Raymond in Boston, Editing by Alexia Garamfalvi, Rod Nickel)