Rhode Island has filed a lawsuit against Kalshi and Polymarket, claiming the two prediction market platforms have caused an eight-percent decline in state lottery sports betting revenue and are operating in violation of state gambling laws. Attorney General Peter F. Neronha filed the legal action, arguing that there is no substantive difference between sports betting and the sports event contracts the platforms offer, and calling on both companies to stop operations in Rhode Island and return their profits to the state.
The lawsuit represents one of the most direct legal challenges to date against the prediction market industry, which has operated under the oversight of the Commodity Futures Trading Commission while multiple states have argued that the platforms’ sports event contracts are effectively functioning as unlicensed sportsbooks. Rhode Island is unusual in that sports betting is operated exclusively through the Rhode Island Lottery, giving the state a direct financial stake in the outcome of the dispute.
Revenue Impact Already Being Felt
In his supporting statement, Attorney General Neronha cited concrete financial data to make the case that prediction markets are already damaging the state’s third-largest revenue stream. He noted that the Rhode Island Lottery’s sports betting handle decreased eight percent from 2024 to 2025, a decline the attorney general attributed directly to the expansion of Kalshi and Polymarket’s sports event contracts.
The Rhode Island Lottery has generated $2.8 billion in revenue since the state legalized sports betting in 2019. Neronha argued that the continued operation of prediction market platforms in Rhode Island threatens that revenue stream, which funds critical state programs. His complaint alleges that Kalshi and Polymarket “not only function as betting platforms, but also adopt the design and terminology of traditional gambling operations,” a characterization that mirrors arguments being made by regulators and legislators in other states.
The Prediction Markets vs. Sports Betting Argument
At the heart of the Rhode Island lawsuit is the same legal debate playing out nationally: are prediction market sports event contracts materially different from sports betting, or are they the same product offered through a regulatory workaround? Kalshi and Polymarket have consistently maintained that their contracts are financial instruments regulated by the CFTC, not gambling products subject to state gaming laws…