A Massachusetts Superior Court judge granted a preliminary injunction Tuesday halting prediction market platform Kalshi from offering sports-related contracts in the state. The ruling by Suffolk County Superior Court Judge Christopher Barry-Smith marks a pivotal loss for the prediction market sector’s primary legal defense: federal preemption.
The Ruling: State Police Power Wins
Judge Barry-Smith sided with Massachusetts Attorney General Andrea Campbell, who sued Kalshi in September for operating an unlicensed sports wagering enterprise. The injunction, set to be formalized by Friday, requires Kalshi to geofence Massachusetts residents from its sports markets.
Kalshi’s legal team argued that its status as a Designated Contract Market (DCM) under the Commodity Futures Trading Commission (CFTC) preempted state gambling laws. They contended that their products are federally regulated derivatives, not bets. Judge Barry-Smith rejected this, stating that compliance with federal derivatives law does not excuse a platform from state public health and safety regulations.
“The Sports Wagering Law is an exercise of traditional state police power… It is not a competing attempt to regulate derivatives markets.”, Judge Christopher Barry-Smith
The Precedent for Polymarket
This decision punctures the "federal shield" strategy used by prediction markets to bypass state gaming commissions. While Kalshi attempted to move the case to federal court earlier this year, the refusal to grant a stay suggests the judiciary sees a clear distinction between financial hedging and sports gambling.
The ruling empowers regulators in other jurisdictions, specifically New Jersey and Maryland, where Kalshi faces similar cease-and-desist orders, to accelerate enforcement. For the broader crypto-adjacent prediction sector, including Polymarket, the precedent is dangerous: a federal license may no longer guarantee immunity from the patchwork of US state gambling laws.
