Rhode Island AG Neronha Sues Kalshi and Polymarket

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Last Update: Mon May 25, 2026, 7:22 am ET

Read Time: 4 minutes

Rhode Island AG Neronha Sues Kalshi and Polymarket

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Rhode Island has entered the escalating national fight over prediction markets after Attorney General Peter Neronha sued Kalshi and Polymarket. The state's lawsuit stems from the two companies allegedly offering illegal sports betting products to residents without state gaming licenses.

The lawsuit, filed in Providence Superior Court, accuses both companies of operating unauthorized sports wagering platforms through so-called sports event contracts. Rhode Island officials argue the products function exactly like traditional sportsbook wagers, despite being framed as financial derivatives.

The legal challenge could become a pivotal moment for US online sportsbooks and prediction market operators alike. At the same time, the lawsuits reflect growing tension between state gambling regulators and federally regulated exchanges seeking to expand sports-related trading products nationwide.

Why Rhode Island Issued Lawsuits Against Kalshi and Polymarket

Attorney General Neronha argued that Kalshi and Polymarket deliberately bypassed Rhode Island gambling laws while still profiting from sports-related contracts tied to professional and collegiate events.

According to the lawsuits, Rhode Island law requires any operator offering sports wagering products to obtain state approval and comply with strict licensing standards. State officials claim both companies ignored those obligations while continuing to serve Rhode Island residents.

The lawsuits also accuse Kalshi of using gambling-style mechanics to encourage repeated participation. Rhode Island specifically pointed to features such as leaderboards, rankings, and constant betting updates that allegedly drive user engagement similarly to traditional sportsbooks.

State officials argued those design elements contradict Kalshi's claims that its products function solely as financial instruments.

"There is no substantive difference between sports betting and 'events contracts' in this context; Kalshi and Polymarket know that, and we know that," noted Neronha in a press release. "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."

RI's Sports Betting Decline Linked to Prediction Markets

The lawsuits also highlighted the financial impact prediction markets may already be having on the state's regulated betting industry. According to Rhode Island Lottery figures cited by Neronha, sports betting activity declined 8% from 2024 to 2025. State officials directly linked that slump to the rise of unregulated prediction markets.

That decline carries broader implications because gaming represents Rhode Island's third-largest revenue source. As a result, regulators argued unauthorized sports event contracts threaten both consumer protections and critical state revenue streams.

Rhode Island also distinguished between the two companies in its complaints. Kalshi operates domestically as a Commodity Futures Trading Commission-regulated exchange. Meanwhile, Polymarket functions as a decentralized prediction platform that technically barred US customers following a previous federal settlement.

However, Rhode Island officials claim residents continue accessing Polymarket despite those restrictions.

Kalshi Filed a Federal Lawsuit Before Rhode Island Took Action

The dispute quickly evolved into a race to the courthouse between Kalshi and Rhode Island regulators.

According to court filings, Kalshi representatives met with Rhode Island officials on May 20, 2026, and allegedly learned that an enforcement action was imminent. The following morning, on May 21, Kalshi filed a preemptive federal lawsuit against Rhode Island officials before the state could formally act.

Hours later, Attorney General Neronha filed Rhode Island's own lawsuits in state court against both Kalshi and Polymarket.

Kalshi's federal complaint argued that the Commodity Exchange Act grants the CFTC exclusive authority over its prediction market products. The company maintained that its sports event contracts qualify as federally regulated derivatives rather than gambling products.

However, the broader legal picture remains complicated. The CFTC itself has previously attempted to block Kalshi from offering sports-related event contracts, arguing they resemble unlawful gaming activity under federal commodities rules. 

As a result, Kalshi now finds itself battling both state regulators and federal authorities over the legality of its products.

Despite that ongoing dispute, Kalshi argued Rhode Island's enforcement effort conflicts with federal law and improperly interferes with interstate commodities trading.

That argument has already surfaced in similar legal disputes nationwide, as states continue challenging prediction market operators over sports-related contracts.

Rhode Island Gambling Faces a Defining Legal Moment

The lawsuits could become one of the most important legal battles involving Rhode Island gambling in recent years.

Rhode Island maintains a tightly regulated sports betting market. Licensed operators are subject to taxation, compliance requirements, and responsible gambling standards. State officials believe prediction market platforms undermine that structure by offering comparable products without following the same rules.

The broader legal conflict also extends well beyond Rhode Island. States including Nevada, Massachusetts, Minnesota, and New Jersey have already questioned the legality of sports event contracts. Meanwhile, prediction market operators continue pushing for broader federal recognition under commodities law.

As a result, the Rhode Island cases may help shape the future relationship between state gambling regulation and federally supervised prediction exchanges.

If Kalshi and Polymarket ultimately prevail, prediction markets could continue expanding nationwide without securing traditional sportsbook licenses. However, if Rhode Island succeeds, states may gain stronger authority to regulate sports event contracts under existing gambling laws. 

Such development will potentially reshape the future of sports-related prediction markets across the country.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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