March 5, 2026.
LANSING – The Michigan Attorney General Dana Nessel has filed a lawsuit (PDF) against KalshiEx, LLC (Kalshi), alleging the derivatives exchange and prediction market company violated Michigan’s Lawful Sports Betting Act (LSBA). The lawsuit, filed in the Ingham County Circuit Court on behalf of the People of the State of Michigan and the Michigan Gaming Control Board, seeks an order of abatement and injunctive relief to halt what the Attorney General contends is the unlawful offering of online sports wagers to Michigan residents.
Attorney General Nessel asserts in the complaint that Kalshi offers an online operation that enables Michigan residents to engage in sports betting under the guise of trading event contracts. The platform allows users to place wagers on the likelihood of sports-related outcomes, conduct transactions through widely used financial systems, and participate in what the lawsuit alleges constitutes unlicensed gambling activity. The Attorney General contends that Kalshi conducts this business in Michigan without the licensing approval of the Michigan Gaming Control Board in violation of the LSBA.
“Corporations cannot circumvent state gaming laws,” said Attorney General Nessel. “My office will hold those who sidestep Michigan’s consumer protections accountable and ensure that betting in our state remains lawful, fair and subject to the oversight our residents expect and deserve.”
The lawsuit asks the Ingham County Circuit Court to declare Kalshi's internet sports betting operation a common law nuisance and to issue a permanent injunction and order of abatement enjoining and restraining Kalshi from engaging in or advertising its internet sports betting operation in Michigan.
What Is Kalshi?
The company was founded in 2018 by Tarek Mansour and Luana Lopes Lara, two MIT graduates who spent the several years and reportedly more than $30 million in legal fees working to establish that the event contracts they were building fall under federal commodities regulation rather than traditional gaming frameworks.
In 2020, the Commodity Futures Trading Commission (CFTC) approved Kalshi as the first Designated Contract Market (DCM) authorized to list event contracts in U.S. history. The platform launched publicly in 2021. By 2025, it had processed tens of billions of dollars in trading volume. CNN and CNBC became broadcast partners. Robinhood integrated Kalshi contracts into its trading interface. Donald Trump Jr. joined as a strategic adviser.
How Kalshi and Predictions Market Work.
Every market on Kalshi is structured as a binary question with a defined resolution date. For example: Will the Federal Reserve cut rates at the March meeting? Will the Cowboys win the NFC East? Will Shai Gilgeous Alexander win MVP?
Participants purchase “Yes” or “No” contracts that trade between $0.01 and $0.99. Each contract settles at $1.00 if the specified outcome occurs and $0 if it does not. At any given moment, the price reflects the market’s collective probability estimate. For example, a contract priced at $0.73 implies a 73% probability.
Kalshi operates through a quote-driven order book in which participants post limit orders and transact with counter-parties. Structurally, this resembles a financial exchange model. Positions may be entered and exited prior to resolution, and contract prices can fluctuate as new information becomes available. As with all trading, both gains and losses are possible. Kalshi’s CFTC designation places it under federal regulatory oversight. In contrast, traditional sports wagering operates under state-by-state regulation, creating differing rules and availability across jurisdictions.
As of March 5, 2026, ten states and two Native American tribes are engaged in active litigation against the prediction market platform Kalshi.
The central legal conflict is whether Kalshi’s "sports event contracts" constitute federally regulated derivatives (overseen by the Commodity Futures Trading Commission "CFTC") or unlicensed illegal gambling (governed by state laws).
States with Active Litigation
- Michigan: On March 3, 2026, the Michigan Attorney General filed a lawsuit in state court to stop Kalshi from offering sports contracts, alleging it circumvents state gambling laws.
- Nevada: Regulators sued Kalshi in state court in February 2026 after a federal court dissolved a previous injunction that had protected Kalshi.
- Massachusetts: The first state to proactively sue Kalshi in state court (September 2025). A preliminary injunction was granted against Kalshi, though an emergency stay currently allows it to operate during the appeal.
- Maryland: A federal court ruled that federal law does not displace state gambling authority, a decision Kalshi has appealed to the Fourth Circuit.
- New Jersey: Engaged in a federal preemption suit; a judge initially ruled in favor of Kalshi, but the state has appealed to the Third Circuit.
- Tennessee: Kalshi recently won a preliminary injunction in February 2026, preventing the state from enforcing gambling laws against its sports contracts.
- Utah: Kalshi filed a preemptive federal lawsuit against Utah officials in February 2026 after they publicly threatened enforcement against the platform.
- Ohio, New York, and Connecticut: All are involved in ongoing federal lawsuits where Kalshi is challenging state cease-and-desist orders or regulatory actions.
Tribal Lawsuits: Native American tribes in California and Wisconsin have filed lawsuits alleging that Kalshi's operations violate tribal-state gaming compacts and the Indian Gaming Regulatory Act.
The Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians sued Kalshi and Robinhood in California, alleging illegal sports gambling.
The Ho-Chunk Nation, the Wisconsin-based tribe, sued Kalshi and partner Robinhood in August 2025. The lawsuit, filed in federal court, alleges the platform facilitates illegal sports betting on tribal lands in violation of the Indian Gaming Regulatory Act (IGRA).
Key Details Regarding the Lawsuits:
- Allegations: The Ho-Chunk Nation claims Kalshi operates as an unlicensed, illegal gambling business and, along with Robinhood, utilizes deceptive advertising.
- Cease-and-Desist Actions: States including Arizona, Illinois, and Montana have issued formal warnings or cease-and-desist letters to the platform.
- Federal Intervention: The Trump administration and the CFTC have recently shifted to support prediction markets, arguing that state regulators cannot override federal jurisdiction over commodities exchanges.
Kalshi and Robinhood vs all the above mentioned parties appears to be heading to the Supreme Court. It is all about the $$$$.
Gambling Harm reports that State-sanctioned online casinos and sports-books generated $27.1 billion in gambling revenue from US players in 2025. States collected more than $6 billion in taxes on online gambling revenue in 2025. The largest online gambling states include Michigan and Pennsylvania.
Many residents of states that have approved sports betting face financial ruin as a result of gaming addictions, primarily young men.
Young men, particularly those aged 18-25, are at a disproportionately higher risk for gambling addiction, with 10% showing signs of a problem compared to 3% of the general population demographic is targeted by sports betting apps and often engages in higher-risk, frequent betting. Kalshi appears that it will fuel the dysfunctional behavior of those that believe they can play the market instead of working to earn income. Unfortunately it appears those suing this company are more concerned about how it affects their income than helping people addicted to gambling.
Public pressure may be mounting to address sports betting. A recent Pew poll found that a growing number of Americans view legal betting to be bad for society.
- Sports gambling addiction treatment includes cognitive behavioral therapy (CBT), motivational interviewing (MI), and support groups like Gamblers Anonymous. Effective, evidence-based approaches to treat gambling addiction focus on altering gambling behaviors, managing triggers, and treating co-occurring mental health issues. Immediate help is available 24/7 by calling or texting 1-800-GAMBLER.