Massachusetts Supreme Court Signals It May Side With the State Against Kalshi

The Massachusetts Supreme Judicial Court heard oral arguments Monday in the case between the Commonwealth and prediction market operator Kalshi, and the tone from the bench was notably skeptical of Kalshi’s central legal claim. Multiple justices questioned whether the company’s sports event contracts are meaningfully different from the sports wagering that Massachusetts law already requires to be licensed. A ruling against Kalshi from the state’s highest court could accelerate a national wave of state-level bans on prediction markets, reshaping where sports bettors can legally trade.

What Happened in Court on May 4

Justices of the Massachusetts Supreme Judicial Court peppered Kalshi’s attorney, Grant Mainland, with questions about the core distinction between the company’s sports event contracts and traditional sports wagers. The case stems from a September 2025 lawsuit filed by Attorney General Andrea Campbell, who alleged that Kalshi was offering sports wagering in the state without the license required by Massachusetts law.

In January 2026, Suffolk County Superior Court Judge Christopher Barry-Smith granted a preliminary injunction blocking Kalshi from accepting sports event contracts from Massachusetts residents. Kalshi appealed, and the Massachusetts Supreme Judicial Court granted direct appellate review, allowing the appeal to skip the intermediate appeals court and proceed directly to the state’s highest bench.

During Monday’s arguments, Justice Scott Kafker pushed back directly on Kalshi’s position. “I mean, for someone who wants to bet on a game, this is a way of betting on a game,” Kafker said, challenging Mainland’s assertion that Kalshi’s offerings are fundamentally different from sportsbook products. Kafker also told Mainland: “I just feel like you’re swimming upstream.”

Justice Dalila Argaez Wendlandt opened the hearing by pressing the commonwealth’s attorney on the breadth of the federal definition of a “swap,” asking: “The definition of swap is pretty broad so tell me why it hasn’t preempted state law?” The question underscored that the justices were probing both sides rigorously — but the structure of the case, in which Kalshi needs to win on two distinct legal points to prevail, means that equal skepticism generally favors the state.

The Central Legal Question

Kalshi’s core argument is that its sports event contracts are “swaps” under federal law — specifically under the Commodity Exchange Act as amended by the Dodd-Frank Act — and that the Commodity Futures Trading Commission has exclusive jurisdiction over swaps traded on a designated contract market. Because Kalshi operates a CFTC-registered designated contract market, it argues state gambling laws are preempted and cannot require it to obtain a Massachusetts sports wagering license.

Massachusetts argues the opposite: that Kalshi’s sports contracts are not swaps in any meaningful sense, and that Congress never intended the Dodd-Frank Act to displace states’ longstanding authority over gambling. Deputy State Solicitor Gerard Cedrone told the court Monday that Kalshi’s offerings are simply sports wagers dressed in financial language. He pointed out that Kalshi has an affiliated entity that often sits on the other side of users’ contracts — functioning much like a sportsbook taking the other side of a bet.

Justice Kafker found Mainland’s explanation of the “financial, economic or commercial consequence” language in the swap definition unconvincing. “I had trouble following the potential financial, economic or commercial consequence here, because it’s a bet on a bet,” Kafker said.

Where the Case Stands Nationally

The Massachusetts case does not exist in isolation. Kalshi has been fighting similar legal battles across more than a dozen states. The legal landscape shifted significantly on April 7, when the U.S. Court of Appeals for the Third Circuit ruled 2-1 in Kalshi’s favor in a New Jersey case, becoming the first federal appeals court to hold that the Commodity Exchange Act preempts state gambling enforcement against CFTC-regulated prediction markets. However, at the trial court level, Kalshi has lost in Maryland, Nevada, Massachusetts, and Ohio.

The Massachusetts Supreme Judicial Court’s case is a state court proceeding, operating on a separate track from the federal circuit court litigation. Whatever the SJC decides will govern whether Kalshi can operate in Massachusetts under state law, though a federal preemption ruling from a circuit court or the U.S. Supreme Court could eventually override a state court ruling. The Fourth Circuit heard oral arguments in the Maryland case the same week — a key federal appellate proceeding that may produce a ruling conflicting with the Third Circuit’s pro-Kalshi decision.

Legal observers widely expect the prediction market question to eventually reach the U.S. Supreme Court, particularly if the Fourth and Ninth Circuits produce rulings that conflict with the Third Circuit. The Massachusetts SJC’s ruling, whenever it arrives, will add another significant data point in one of the most closely watched regulatory battles in the gambling industry.

What It Means for Bettors

For Massachusetts sports betting users, the practical effect is already being felt. The preliminary injunction against Kalshi remains on hold while the appeal is pending, meaning Massachusetts residents can still access Kalshi’s platform in the interim. If the SJC rules for the state, that stay would likely be lifted, and Kalshi would be forced to block Massachusetts users from its platform unless and until a federal court intervenes on preemption grounds.

A ruling from the state’s highest court in favor of Massachusetts would also send a strong signal to other state legislatures and attorneys general that pursuing enforcement actions against prediction markets is legally viable, even in the face of the CFTC preemption argument. States tracking this case include Ohio, Nevada, and others weighing their own regulatory options. The SJC has not indicated a timeline for its ruling.