Rhode Island AG sues Kalshi, Polymarket after preemptive suit
Rhode Island is the latest state to take legal action against prediction markets that offer sports event contracts that resemble state-sanctioned online sports wagers.
State Attorney General Peter F. Neronha filed a lawsuit Thursday in Rhode Island Superior Court against Kalshi and Polymarket for offering sports event contracts that are “subject to Rhode Island state gambling laws.”
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” said Neronha 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.”
Neronha is suing the prediction markets after Kalshi filed a suit against Rhode Island earlier to combat potential enforcement action by the state and the attorney general.
“In short, the Rhode Island Attorney General refused to provide any assurances that the state would refrain from enforcement. This information makes clear that Rhode Island views Kalshi’s event contracts as illegal under its state laws and intends to act imminently against Kalshi’s federally regulated business,” Kalshi’s suit reads in part.
Rhode Island AG makes several arguments in suit
In the suit, Neronha argues that Polymarket and Kalshi’s sports event contracts share similar characteristics to sports wagers, subjecting the platforms to state gambling laws:
- Polymarket and Kalshi offer “yes” or “no” positions for their event contracts
- Platforms allow users to “take monetary positions on real-world events”
- Event contracts provide users with fixed payouts if positions are correct
- Kalshi and Polymarket offer event contracts on both games and player performances
“There is only one conclusion to be drawn from these similarities: Kalshi and Polymarket function, look, and feel like gambling because they are gambling. As such, they are rightly subject to Rhode Island’s gambling laws,” reads the complaint.
Neronha also points to the potential tax revenue Rhode Island is unable to collect from prediction markets as the platforms are not subject to the same tax obligations as the state’s exclusive online sports wagering platform, Sportsbook Rhode Island.
“While these private companies continue to profit exponentially off hard-working people, the state’s third largest revenue stream is detrimentally affected, which means less money to fund critical parts of programs that serve Rhode Islanders every day,” added Neronha.
How Rhode Island feels prediction market impact
Rhode Island and Neronha provided data that indicates the impact prediction markets have on the state’s gaming markets, with sports wagers declining by 8% from 2024 to 2025.
Neronha also argues that Kalshi and Polymarket are detrimental to the “mental and financial well-being” of Rhode Islanders as they lack the same consumer protection standards as Sportsbook Rhode Island and licensed sportsbooks in other U.S. markets.
“Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction,” continued Neronha.
Neronha and Rhode Island are seeking a declaration from the court confirming that Kalshi and Polymarket are “facilitating gambling that is subject to Rhode Island’s constitutional, statutory, and regulatory requirements” through their delivery of sports event contracts.
Rhode Island is also seeking a permanent injunction against the two prediction markets, as well as restitution and disgorgement for circumventing state gambling laws.
Rhode Island joins growing list of Kalshi opponents
Kalshi is also being sued by states outside of Rhode Island. Other jurisdictions where Kalshi is also facing civil and/or criminal action from leaders in government:
- Arizona
- Massachusetts
- Michigan
- Nevada
- Washington
Last week, Kalshi’s suit in Washington was remanded to state court after the company attempted to move the suit to a federal court. The suit was remanded by U.S. District Judge John C. Coughenour because gambling regulation is a “state issue.” Kalshi filed court documents appealing the decision while seeking a stay as legal proceedings continue.
Washington AG Nick Brown responded by filing a request to the U.S. Court of Appeals for the Ninth Circuit to deny Kalshi’s emergency motion for a stay pending appeal.
In Arizona, AG Kristin Mayes emerged as the first AG to file a criminal action against a prediction market in state court for offering “an illegal gambling business” in the state. Mayes and Arizona are pursuing 20 criminal misdemeanor charges against Kalshi for offering a range of “bets” on federal elections and sports without a gaming license. That action is currently stopped by an injunction.
https://igamingbusiness.com/sports-betting/prediction-markets-dominate-conversation-senate-hearing-2026/