Judges on Massachusetts’ highest court questioned whether Kalshi’s sports event contract resembles gambling and falls within the state’s gambling statutes.
The Massachusetts Supreme Judicial Court signaled skepticism of Kalshi’s core legal arguments during oral arguments on Monday, appearing likely to uphold the state’s authority to block the company’s sports-event contracts.
Justices Question Whether Contracts Are Simply “Bets”
A central issue throughout the hearing was whether Kalshi’s sports-event contracts are fundamentally different from traditional wagering.
Justice Gabrielle Wolohojian challenged the distinction, asking:
In what way do they differentiate from what would colloquially be known as a bet?”
Justice Scott Kafker then framed the issue more directly:
I understand betting on all kinds of commodities is clearly covered. It’s sports gambling.”
He reinforced that view later, stating:
If you want to gamble on a game, this is one way to do it.”
Kafker further emphasized the overlap with traditional gambling, noting:
This does seem to have a major aspect of sports gambling to it.”
Kalshi’s attorney, Grant Mainland, argued the platform operates as a regulated financial exchange rather than a sportsbook, saying:
This is fundamentally a federal regulatory issue.”
Mainland argued that Kalshi’s structure differs, including user-to-user trading and clearinghouse mechanics. However, judges questioned whether these mechanics change the underlying nature of the activity.
Preemption Argument Faces “Upstream” Battle
As with cases in other states, one of Kalshi’s core arguments is that the Commodity Futures Trading Commission (CFTC) has “exclusive jurisdiction” over event contracts under the Commodity Exchange Act, as amended by the Dodd-Frank Act.
However, justices questioned whether Congress clearly intended to displace state gambling laws.
Kafker framed the issue in stark terms:
I just feel like you’re swimming upstream here.”
He added that Congress would have spoken more clearly if it intended such a shift:
If Congress was going to do this, it would do this more clearly and more distinctly.”
Justice Dalila Argaez Wendlandt reinforced that point, questioning whether “exclusive jurisdiction” alone is sufficient to override state law.
Judges Press Kalshi on “Gaming” Classification and CFTC Rule 40.11
Beyond the broader preemption debate, the court also drilled into how Kalshi classified its contracts under CFTC rules.
Justice Elizabeth N. Dewar questioned whether Kalshi had taken inconsistent positions on whether its contracts involve gambling, asking:
So I’m confused. Are these contracts involving gaming or not?”
The line of questioning focused on CFTC Rule 40.11 and whether Kalshi’s self-certification process adequately addressed that requirement.
Mainland argued the rule contains multiple components, stating:
40.11 has 2 components to it. Does it involve gaming, and is it contrary to the public interest?”
He added that regulators had not conducted a formal review of sports-event contracts:
There has never been a public interest review with respect to sports-related event contracts.”
However, the court appeared unconvinced, with Dewar emphasizing a stricter reading of the rule:
In 40.11 says that all contracts involving, quote, gaming are not allowed, correct?”
The exchange highlighted a potential vulnerability in Kalshi’s position, particularly around its reliance on self-certification and whether the absence of CFTC intervention is sufficient to support its preemption claims.
State Warns of “Sea Change” in Gambling Regulation
Massachusetts argued that accepting Kalshi’s position would significantly undermine state oversight of sports betting.
Deputy State Solicitor Gerard Cedrone told the court:
It would be blocking out state regulation of what is in all respects a sports bet.”
Cedrone also pushed back on Kalshi’s classification of its contracts as swaps, arguing that a broad interpretation would render key parts of the statutory definition meaningless.
At the same time, judges also probed the state’s arguments, particularly around whether event contracts could fall within the Commodity Exchange Act’s definition of a swap.
Broader Legal Stakes and Industry Impact
The case is one of several nationwide disputes over federal derivatives oversight versus state gambling authority.
Recent federal rulings have shown a split among courts on how they interpret that question.
Recently, the United States Court of Appeals for the Sixth Circuit denied Kalshi’s request for an injunction pending appeal in its challenge to Ohio’s sports betting enforcement, signaling skepticism toward its arguments.
Judges in the United States Court of Appeals for the Ninth Circuit have similarly questioned whether event contracts are meaningfully different from sports betting and whether federal law can override state regulation.
By contrast, the United States Court of Appeals for the Third Circuit ruled in favor of Kalshi, siding with the CFTC’s position that federal law preempts certain state enforcement actions.
Earlier this year, Massachusetts was the first state to secure a preliminary injunction against Kalshi. However, an appellate court later issued a stay, allowing the platform to continue operating while litigation proceeds.
If the Supreme Judicial Court upholds the injunction, the ruling would make Massachusetts the second state, after Nevada, to enforce a court-backed ban on Kalshi’s sports contracts.
The outcome is being closely watched and could ultimately reach the Supreme Court of the United States, as conflicting rulings across jurisdictions continue to emerge.
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