Kalshi Blocked in Massachusetts: Judge Shatters ‘Federal Shield’ Defense

The Lede

Massachusetts residents will lose access to Kalshi’s sports prediction markets by Friday. Suffolk Superior Court Judge Christopher Barry-Smith granted a preliminary injunction to Attorney General Andrea Joy Campbell on Tuesday, ruling that the platform’s federal status does not exempt it from state gambling laws. The decision marks a critical blow to the “Federal Preemption” legal strategy used by prediction markets to bypass local gaming commissions.

The Precedent

This ruling dismantles a core industry defense. Kalshi, a CFTC-regulated Designated Contract Market (DCM), argued its federal oversight preempted state authority. Judge Barry-Smith rejected this, stating that Congress did not intend to displace “traditional state police powers, such as gambling regulation.”

The court’s order requires Kalshi to halt all sports-related event contracts in the state by Friday, January 23. While Kalshi integrates crypto rails, recently adding USDC deposits, the crackdown targets the asset class itself, not the settlement method. This distinction is vital for competitors like Polymarket, which rely on similar arguments regarding their decentralized nature.

Institutional Context

“The Court has made clear that any company that wants to be in the sports gaming business in Massachusetts must play by our rules – no exceptions.” . MA Attorney General Andrea Joy Campbell

The timing aligns with a broader state-level offensive. Tennessee recently issued cease-and-desist orders to both Kalshi and Polymarket, threatening fines of $25,000 per violation. Massachusetts is the first to secure a court order, creating a blueprint for other jurisdictions to challenge federally regulated prediction markets. If this precedent holds in appeals, the “prediction market” loophole for unlicensed sports betting could close nationwide.