Massachusetts judge Christopher Barry-Smith from the Suffolk County Superior Court in Boston has issued an injunction against Kalshi’s sports betting offering in the state. Judge Barry-Smith is acting at the request of Massachusetts Attorney General Andrea Campbell, who alleges the prediction market violates gaming regulations.
Judge Barry-Smith said he plans to finalize the injunction requiring Kalshi to comply with the state’s sports betting law henceforth, following a hearing on January 16. According to the judge, the licensure and the consequent oversight of sports betting in Massachusetts serve both public safety and health, and the Commonwealth’s financial interests. However, he is still considering pausing his order to allow the prediction market platform to file an appeal.
Meanwhile, state AG Campbell issued a statement calling the ruling a major step toward strengthening Massachusetts’ gambling laws. She added that the ruling also aims to mitigate the significant public safety consequences that come with unregulated gambling.
Judge Barry-Smith says ruling serves public interest
According to the Massachusetts judge, the preliminary injunction order serves the promote public interest. Barry-Smith added that seeking enforcement action against non-compliant entities also serves the public interest by ensuring equal oversight and fair competition among all sports betting operations in the state.
Meanwhile, the judge emphasized that Kalshi’s argument against the allegations is not compelling. He noted that the prediction market platform knowingly continued to offer sports betting in Massachusetts even after the CFTC warned it to be cautious, given ongoing state enforcement efforts requiring sports wagering entities to be licensed.
According to Judge Barry-Smith, Kalshi well understood that its business model is in direct conflict with state enforcement regimes. Therefore, any hardship Kashi faces in removing its non-compliant offerings in Massachusetts is of its own making because it chose to take that risk head-on.
To support his ruling, Barry-Smith cited Kalshi’s recent loss in a similar case last November, when a federal Judge in Nevada found that the prediction market platform was subject to that state’s gaming laws. He also noted that Kalshi has an overly broad view of federal law, emphasizing that Congress never intended to displace traditional state powers to regulate gambling. Barry-Smith believes that these state gambling regulatory powers can coexist with the CFTC’s regulatory authority.
Kalshi claims state gambling laws do not apply
In its defence, Kashi argues that state gaming laws, such as those in Massachusetts, do not apply to its sports event contracts. The prediction market platform argues that the CFTC has exclusive jurisdiction over its operations nationwide, given the regulator’s authority over exchange-traded swaps.
However, AG Campbell previously claimed that Kalshi’s prediction markets, which are structured as binary options, operate the same way as licensed sports betting operators. She used FanDuel as an example, saying that the prediction market is in the business of accepting bets on amateur and professional sporting events under the guise of offering contracts for sporting events. Campbell further argued that Kalshi’s sporting event contracts constitute sports betting under Massachusetts law and applicable regulations.
Moreover, a portion of the Massachusetts lawsuit points to Kashi’s actions, which the AG’s office alleges are designed to hook potential bettors. According to Barry-Smith, the prediction market employs behavioral design mechanisms borrowed from gambling psychology to encourage impulsive gambling. Kalshi’s strategic design also exploits award anticipation and diminishes users’ perception of financial risk.
Court documents further pointed to the prediction market’s website design, which presents possible payouts in bright green font that signals correctness and safety. Presenting odds in black and potential wins in green subtly encourages high-risk betting behavior by emphasizing rewards while obscuring risk.
However, a Kalshi spokesperson argued that the platform offers users a fair, transparent, federally regulated, and nationwide marketplace. The spokesperson pointed out that Massachusetts is trying to block the prediction market’s innovation by relying on outdated ideas and laws.
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Source: https://www.cryptopolitan.com/massachusetts-judge-bars-kalshi/
