Massachusetts Granted Preliminary Injunction Against Kalshi

Kalshi may soon be on its way out in the Bay State.

A Superior Court has granted the state of Massachusetts a preliminary injunction against the prediction market operator. The two sides were negotiating the request but failed to reach an agreement. The operator is being accused of operating in the Massachusetts sports betting market without a license, despite Kalshi asserting it is offering commodity trading.

The injunction will force Kalshi to cease sports contract trading in the state starting this Friday. However, Kalshi will be able to appeal the injunction and request a stay. This would allow the platform to continue operating in the market while its legal battle is resolved. 

In the ruling, the court rejected Kalshi’s argument that states lack the authority to regulate sports prediction markets.

“While it would make sense for Congress to displace a state’s targeted attempt to regulate a derivative market, for example, or to clarify the roles of separate federal agencies, as addressed in Merrill Lynch, that logic does not suggest Congress intended to displace traditional state police powers, such as gambling regulation – particularly in the absence of the express language so stating,” the Superior Court ruling read.

Kalshi may very well find a better outcome in an appeals court, but the preliminary injunction is a bad sign. Crypto.com's prediction platform was forced out of Nevada last year after a court issued a preliminary injunction. That case was cited in the ruling, setting a greater precedent for future cases.

With other states submitting similar requests, industry operators could stand to lose massive volume as they fight for survival.

Bad Timing for Kalshi

Kalshi has fought tooth and nail to keep its sports prediction platform operating in all 50 states. It has issued warnings about the fallout from state regulation, linking it to the health of the global economy. Many of these claims have been easily refuted, but the operator has reason to panic about the timing of the Massachusetts injunction.

The Super Bowl, which is the most heavily bet event in the US, is less than three weeks away. Kalshi saw a ton of volume during last year’s game and added new markets in anticipation of even more action this year. Those markets have already helped add volume during the season, but failing to offer them for the Super Bowl would be a massive hit.

The Bay State is small, but it has a large population. Boston is one of the largest cities in the US, and the hometown New England Patriots have a chance to play in this year’s Super Bowl. That would lead to even more wagers, which Kalshi is in danger of missing out on.