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The federal government intervened in Kalshi’s legal battle with Rhode Island, arguing that the state could not use its gambling laws to restrict federally regulated prediction market contracts. The move widens the dispute over who controls event-based financial products linked to sporting and other results.
The United States and the Commodity Futures Trading Commission have filed a proposed complaint in the U.S. District Court for the District of Rhode Island, seeking to join Kalshi’s lawsuit and stop state officials from enforcing gambling laws against federally regulated exchanges. According to the filing, Congress gave the CFTC exclusive authority over commodity futures, options and swaps traded on federally regulated exchanges, leaving no room for conflicting state regulations.
The Rhode Island enforcement action, filed May 21, 2026, is against Kalshi and QCX LLC, which operates Polymarket. According to the proposed complaint, the state alleges that « Kalshi and Polymarket facilitate gambling (specifically sports betting) in Rhode Island by allowing bettors to place bets on the outcome of sports games and the performance of individual players, under the guise of ‘commercial’ ‘event contracts’ on ‘prediction markets.' »
State officials are seeking an injunction to prevent companies from bidding on contracts for sporting events in Rhode Island. Kalshi previously argued that « Rhode Island’s stated intent to prohibit Kalshi from operating falls within the federal framework that Congress has established to regulate derivatives trading on federally designated exchanges. »
Federal regulators say these products are financial derivatives, not gambling. The filing says the contracts are « swaps » under the Commodity Exchange Act and are traded on certain CFTC-regulated contract markets, making them subject to the Commission’s exclusive jurisdiction. The agencies argue that Rhode Island law prevails when applied to these federally regulated products.
Unlike Kalshi’s lawsuit, which focused on his own business, the federal government is seeking relief covering every CFTC-regulated designated contract market. The filing states that the proposed intervenors are seeking « an injunction barring the application of state law to event contracts traded on all DCMs, not just event contracts traded on Kalshi. »
The complaint also describes the Commission’s oversight, noting that it regulates thousands of self-certified event contracts, has approved exchanges including Kalshi, Polymarket, Gemini Titan and Nadex, takes enforcement actions, maintains information-sharing agreements with Major League Baseball and the National Hockey League and is considering additional rulemaking.
Federal officials argued that Rhode Island’s actions interfered with the government’s « sovereign, statutorily protected interest in enforcing federal law. » They also point to recent court decisions, including a Third Circuit ruling and injunctions issued in other states that have temporarily blocked state enforcement of gambling against CFTC-regulated exchanges.
The case is part of a national conflict involving Arizona, Connecticut, Illinois, Minnesota, New York and Wisconsin, where the states have challenged the prediction markets. A hearing on Kalshi’s request for a preliminary injunction is scheduled for July 16, and the United States and the CFTC have requested to participate in oral arguments.
Featured Image: CFTC / Canva
Prediction Markets,Commodity Futures Trading Commission,kalshi,Rhode Island
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