“Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction,” Rhode Island Attorney General Peter F. Neronha said. “We demand Kalshi and Polymarket stand down, abide by our state laws, and disgorge their profits, and this lawsuit is the first step towards that goal.”
Rhode Island Attorney General Peter F. Neronha has filed a lawsuit against Kalshi and Polymarket, asking a superior court to find that the platforms’ use of so-called “event contracts” constitutes a form of sports betting that is regulable under state law.
In a press release, Neronha said that the terms used by companies like Kalshi and Polymarket are intended to serve as a thin veneer of legality. The reality, Neronha claims, is that there is often no functional difference between an event contract and a sports bet.
“There is no substantive difference between sports betting and ‘events contracts’ in this context; Kalshi and Polymarket know that, and we know that,” Neronha said. “The problem here is that Rhode Island State law heavily regulates gambling, for good reason, and we allege that Kalshi and Polymarket are evading our laws.”
Neronha said that, by skirting Rhode Island’s laws on gambling, it is depriving the state and its taxpayers of valuable revenue.
“Rhode Islanders are losing out,” he said. “While these private companies continue to profit exponentially off hard-working people, the State’s third largest revenue stream is detrimentally affected, which means less money to fund critical parts of programs that serve Rhode Islanders every day.”
Neronha also accused the defendants of taking few, if any, meaningful precautions to help consumers with gambling addictions.
“Further, we allege that these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devastating effects of gambling addiction,” he said. “We demand Kalshi and Polymarket stand down, abide by our state laws, and disgorge their profits, and this lawsuit is the first step towards that goal.”
10-WJAR notes that Kalshi pre-emptively sued the state shortly before Neronha’s lawsuit was announced. In its lawsuit, Kalshi said it “believes Rhode Island will imminently bring an enforcement action against Kalshi with the intent to prevent Kalshi from offering event contracts for trading on its federally regulated exchange.”
Kalshi generally maintains that it is a legal business subject to regulation by the federal government. At the same time, the company insists that it shouldn’t be burdened or bound by state-level gaming laws.
“Defendants have made clear that they (mistakenly) believe that Kalshi’s contracts are instead subject to—and unlawful under—Rhode Island gambling law,” the company said. “Defendants’ threatened actions would result in irreparable harm, not just to Kalshi, but to its customers and commercial counterparties.”
Sources
CFTC sues Rhode Island over actions against prediction markets
Kalshi, Neronha file dueling lawsuits over online prediction markets in Rhode Island
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