Rhode Island AG Sues Kalshi and Polymarket Over Sports Contracts; Kalshi Files Federal Counter-Suit the Same Day
Rhode Island Attorney General Peter F. Neronha filed state-court actions in Providence last week alleging Kalshi and Polymarket sports event contracts are illegal sports betting under RI law. Kalshi responded the same day with a federal preemption suit in the US District Court for Rhode Island.
Rhode Island Attorney General Peter F. Neronha filed two separate civil actions in Rhode Island Superior Court (Providence County) last week against Kalshi and Polymarket, asking the court to declare that the platforms' sports event contracts are "gambling" under Rhode Island law and therefore subject to the Rhode Island State Lottery (RILOT) regulatory regime, the casino-gaming statute, and the constitutional voter-referendum requirement that governs new forms of gambling in the state. Defendants named in the second action include Christina Tobiasz, the gaming and athletics administrator at the Rhode Island Department of Business Regulation. Rhode Island is the seventh state in active prediction-market litigation in 2026, alongside Arizona, Illinois, Connecticut, New York, Minnesota, and Wisconsin.
"There is no substantive difference between sports betting and 'events contracts' in this context; Kalshi and Polymarket know that, and we know that," Neronha said in his announcement. "Rhode Island State law heavily regulates gambling, for good reason, and we allege that Kalshi and Polymarket are evading our laws. And Rhode Islanders are losing out." The AG framed the financial stakes directly: since legalization in 2018, Rhode Island sports betting has generated roughly $2.8 billion in gross revenues, and sports-betting tax is now the state's third-largest revenue stream. Neronha is seeking disgorgement of platform profits attributable to Rhode Island users, in addition to a permanent injunction. The disgorgement demand goes meaningfully beyond what most other state AGs have sought.
Kalshi filed its counter-suit the same day in the US District Court for the District of Rhode Island, naming Neronha and Tobiasz as defendants. The federal complaint leads with the same Commodity Exchange Act preemption argument that has now succeeded in Arizona before Judge Liburdi (May 5 preliminary injunction) and is pending in the CFTC's suits against Minnesota, Illinois, Connecticut, and New York. "An enforcement action by Rhode Island designed to prohibit Kalshi from offering contracts that federal law permits would intrude on the comprehensive federal scheme for regulating designated exchanges," Kalshi's counsel wrote. The key procedural question is whether the federal court will assert jurisdiction over the preemption issue before the state court rules on the underlying gambling-law question; if the federal court moves first and grants a preliminary injunction along the lines of Liburdi's Arizona order, the state action effectively halts.
The Rhode Island pattern (state AG sues platforms; platform counter-sues in federal court) mirrors what happened in Wisconsin a month earlier, where AG Josh Kaul sued five platforms in late April and the CFTC followed with its own federal complaint against Wisconsin on April 28. Whether the CFTC also files separately against Rhode Island in addition to Kalshi's private suit is the open question; the CFTC has historically waited two to four weeks after a state action before bringing its own federal complaint. For Rhode Island residents, the practical status today is unchanged: all platforms remain accessible while the litigation proceeds, and there is no individual-trader liability under the statutes Neronha is invoking. The state has chosen the same battlefield seven other states have already chosen, with one important difference: the federal court here will be deciding the preemption question against the backdrop of a clean appellate precedent in Arizona, and the District of Rhode Island sits in the First Circuit, which has historically been preemption-friendly in financial-regulation cases.
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