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The state-level fights against prediction markets keep growing, with Rhode Island now joining the long list of jurisdictions legally targeting the platforms.
On May 21, Rhode Island Attorney General Peter F. Neronha filed a lawsuit against prediction market firms Kalshi and Polymarket. The suit accuses the companies of evading state gambling laws by offering sports-related prediction contracts without going through the state’s regulated betting framework.
A week later, the Commodity Futures Trading Commission (CFTC), which argues that it is the sole regulator of prediction markets, sued Rhode Island as a show of solidarity.
What started as isolated disputes is fast turning into a coordinated national battle involving courts, lawmakers, gaming regulators, attorneys general, and even federal agencies.
Rhode Island’s core argument
The state’s position mirrors many of the arguments already being made elsewhere across the country.
Rhode Island officials argue that contracts tied to sporting events function similarly to traditional sports betting products and should therefore be regulated under state gaming law. From the state’s perspective, platforms like Kalshi and Polymarket are effectively offering sports wagering outside the licensed system that local sportsbooks are required to follow.
That issue has become increasingly controversial as prediction platforms continue expanding deeper into sports markets.
To regulators, the overlap is becoming harder to ignore:
- Users speculate on sports outcomes
- Markets fluctuate based on implied probability
- Real money changes hands
- Payouts depend on game results
From a consumer-facing standpoint, states argue that many of these products are nearly indistinguishable from sports betting.
Another state joins the battle
Rhode Island is far from alone. Over the last several months, states across the country have launched increasingly aggressive actions against prediction market platforms:
- New Jersey joined multi-state efforts targeting sports event contracts
- Wisconsin filed suit alleging illegal sports betting activity
- Massachusetts elevated its Kalshi dispute to the state Supreme Judicial Court
- Minnesota moved to ban sports prediction markets outright
- Ohio pursued proposed fines tied to sports contracts
- Arizona launched aggressive enforcement efforts
- Pennsylvania introduced legislation focused partly on insider trading concerns
- Illinois became part of broader federal-state legal disputes
Rhode Island’s lawsuit reinforces the idea that opposition to prediction markets is no longer isolated or temporary. States are increasingly coordinating around a shared concern that prediction platforms are entering sportsbook territory without being regulated like sportsbooks.
Federal agency jumps in
At the same time states are escalating enforcement, the CFTC continues to insist that prediction markets fall under commodities oversight. Its suit against Rhode Island is the agency’s seventh lawsuit against states.
Most believe at least one of the dozens of cases concerning prediction markets will make it to the US Supreme Court.
Platforms like Kalshi argue their contracts are federally regulated financial instruments. Under that framework, states should not be able to selectively prohibit contracts listed on federally supervised exchanges.
States strongly disagree about the sports-related contracts offered by prediction market platforms. They contend that those types of contracts fall squarely under state gambling authority regardless of how they’re structured.
Why sports contracts are a breaking point
Sports markets have effectively become the center of the entire prediction market regulatory battle. Political and macroeconomic contracts still generate attention, but sports trading is where volume, mainstream appeal, and legal pressure are all accelerating fastest.
Part of the reason is simple: Sports contracts are easier for regulators, lawmakers, and consumers to compare directly to state sports betting laws. That comparison has only become stronger as prediction platforms adopt sportsbook-style mechanics. Both Kalshi and Polymarket have recently introduced multi-leg contracts, which resemble parlays.
The more prediction markets move toward sports-focused engagement products, the harder it becomes to maintain a clear distinction in the eyes of state regulators.
Why the RI suit matters
The Rhode Island lawsuit matters because it shows that pressure is spreading geographically and politically.
Prediction markets are no longer operating in a relatively undefined space where only a handful of regulators are paying attention. They are now facing:
- State lawsuits
- Legislative bans
- Congressional hearings
- Federal-state jurisdiction fights
- Insider trading concerns
- Consumer protection scrutiny
At the same time, user interest in the products continues to grow rapidly.
That combination – rapid growth paired with rising legal resistance – is forcing the industry toward a point where clearer rules will eventually become unavoidable.
What makes this dispute unique?
What makes the current situation new is that prediction markets now sit directly between multiple industries at once.
They overlap with:
- Financial exchanges
- Gambling products
- Sportsbooks
- Political forecasting
- Retail trading
- Crypto-style speculation
That overlap is exactly why regulators are struggling to categorize them cleanly. Some officials view them primarily as financial instruments. Others see them as gambling products with financial branding layered on top.
Until courts or Congress establish clearer boundaries, legal battles are likely to continue escalating.
