Rhode Island Sues Kalshi and Polymarket, Says Prediction Markets Are Costing the State Millions in Betting Revenue

Rhode Island Attorney General Peter F. Neronha has filed a lawsuit against Kalshi and Polymarket, claiming the prediction market platforms have caused an eight-percent decline in the state lottery’s sports betting revenue and are operating illegal gambling businesses in violation of Rhode Island law. The legal action, filed against both companies, calls on them to cease operations in the state and return the profits they have earned from Rhode Island residents.

The case is the most direct legal challenge an individual state has yet launched against the prediction market industry. Rhode Island is unusual among US states in that all sports betting is handled exclusively through the Rhode Island Lottery, which means the state government has a direct and measurable financial stake in competition from prediction market platforms. Attorney General Neronha cited the lottery’s own data showing that sports betting handle fell eight percent from 2024 to 2025, a decline he attributed to competition from Kalshi and Polymarket.

The Core Legal Argument

Neronha’s complaint argues that Kalshi and Polymarket’s sports event contracts are legally indistinguishable from traditional sports betting, regardless of how the platforms have been categorized at the federal level. Kalshi and Polymarket operate under oversight from the Commodity Futures Trading Commission, which has authorized their sports event prediction contracts as financial instruments rather than gambling products. Rhode Island’s lawsuit directly challenges that framework by asserting that state gambling law applies to these products independently of federal authorization.

The attorney general stated that the platforms “adopt the design and terminology of traditional gambling operations” and are competing directly with the Rhode Island Lottery for the same sports bettors. Since the lottery’s sports betting operation launched in 2019, it has generated $2.8 billion in total revenue, representing the state’s third-largest revenue source. Neronha argued that protecting that revenue stream is a matter of public interest, as it funds critical programs for Rhode Island residents.

National Context for Bettors

The Rhode Island lawsuit arrives as the prediction market industry faces growing pressure from multiple directions. A Senate committee held a hearing this month examining whether federal standards for prediction markets need to be updated. Minnesota enacted legislation making certain prediction market operations a felony, which the CFTC responded to with a lawsuit against the state’s governor. Kalshi also made a $1 million pledge to the National Council on Problem Gambling as it faces heightened regulatory scrutiny.

For sports bettors who use Kalshi or Polymarket in Rhode Island, the immediate practical impact depends on how quickly the courts act and whether the platforms respond by restricting Rhode Island access during the litigation. Both companies are expected to contest the lawsuit vigorously, arguing that their federal CFTC authorization preempts state action. The outcome of that legal argument could determine not just the fate of prediction markets in Rhode Island but whether states across the country can effectively restrict or ban these platforms within their borders.

Bettors in Rhode Island interested in legally sanctioned options can review the available choices on the Rhode Island sports betting page for current information on licensed platforms.