The dispute over who controls the regulation of emerging prediction markets has further escalated, with Kalshi asking a federal court to prevent Montana authorities from applying state gambling laws to its platform.
The case surrounds the legal question of whether federally regulated derivatives exchanges fall exclusively under national oversight or can also be subject to state-level restrictions. Kalshi argues that its operations, including the trading of event-based contracts, are governed solely by the Commodity Futures Trading Commission under the Commodity Exchange Act.
Montana regulators have taken a different position. Following an investigation, the state’s Gambling Control Division concluded that Kalshi’s offerings constitute illegal gambling and issued a cease-and-desist order.
The agency said it had identified probable cause that the activity met the legal definition of gambling “because participants risk money or other things of value for a gain that is contingent in whole or in part upon lot, chance, or the operation of a gambling enterprise.”
The company has responded by filing suit against Attorney General Austin Knudsen and other state officials, seeking to halt enforcement while the courts determine whether federal law preempts Montana’s statutes. The complaint requests both declaratory and injunctive relief to block any regulatory action.
Kalshi’s platform allows users to trade on the outcome of real-world events by buying contracts tied to “yes” or “no” outcomes. The value of these contracts fluctuates before resolution, and users can exit positions early depending on market pricing. Contracts span multiple categories, including economic data, elections, and sports outcomes.
In its filing, Kalshi argues that these transactions are not wagers placed against a central operator but exchanges between market participants. “Because traders do not take a position against the exchange itself, traders’ ability to hedge risk requires counterparties willing to assume risk in the hope of seeing a return,” the company’s attorneys wrote.
The lawsuit also points to what Kalshi describes as a breakdown in prior understanding between the company and Montana officials. According to the complaint, both sides had agreed in 2025 to delay enforcement while related litigation in Nevada proceeded. That case remains ongoing, with arguments scheduled before a federal appeals court.
Despite that earlier understanding, Montana sent a second cease-and-desist letter this month, warning of potential legal action if Kalshi did not stop offering contracts within the state. The company said this move created an immediate threat of enforcement and prompted the federal filing.
Kalshi’s legal argument relies heavily on federal preemption. The complaint states that Congress established the CFTC to ensure uniform regulation of derivatives markets and to avoid conflicting state rules.
“One of Congress’s avowed goals in creating the CFTC was to avoid the ‘chaos’ that would result from subjecting exchanges to a patchwork of 50 different—and potentially conflicting—state laws,” the company’s attorneys wrote.
The case unfolds alongside a series of conflicting rulings in other jurisdictions. A federal judge in Nevada has restricted Kalshi from offering contracts tied to sports events, while a recent appellate decision found that New Jersey lacked authority to regulate the platform. At the same time, the CFTC has initiated lawsuits against states attempting to impose similar controls on prediction markets.
Montana law prohibits unlicensed gambling activities and provides for enforcement measures that can include injunctions and potential prosecution. In its correspondence, the state indicated it was seeking voluntary compliance but warned that refusal could lead to legal action.
Kalshi maintains that such enforcement would interfere with a federally supervised exchange and undermine a regulatory framework designed to operate on a nationwide basis. The company is seeking immediate court intervention to prevent Montana authorities from proceeding while the jurisdictional dispute is resolved.
Original article: https://www.yogonet.com/international/news/2026/04/15/118589-kalshi-seeks-court-intervention-to-block-montana-39s-gambling-law-enforcement-on-its-platform
