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.
Operators mentioned in this article
Recent updates
An Independent Integrity Body Found 7 Betting Irregularities at the World Cup. FIFA Said There Were None. The Clash Centers on Polymarket.
The Group of Copenhagen — the Council of Europe's independent match manipulation watchdog — raised seven yellow notices for potential betting irregularities during the 2026 World Cup, in direct contradiction to FIFA's own Integrity Task Force, which published an all-clear on Tuesday. The most troubling finding involves Polymarket: the platform opened a market on July 2 asking whether Folarin Balogun would play against Belgium — the same day Balogun received a red card and three days before FIFA publicly confirmed his ban was suspended. No equivalent markets were opened for any of the other 14 red cards shown at the tournament.
After Yesterday's Hearing, Congress Looks Ready to Legislate on Prediction Markets — Not Just Watch
The House Agriculture Subcommittee held a two-hour hearing on July 22 examining sports event contracts, with witnesses from the American Gaming Association, tribal gaming, and both sides of the CFTC authority debate. Subcommittee Chair Dusty Johnson said Congress 'cannot afford to be silent' and signaled there is 'work for them to do.' Witnesses urged members to advance H.R. 7840, the Event Contract Enforcement Act, which would ban sports event contracts outright. The hearing adds a third front to a fight that is already being waged simultaneously in ten state courts and at the CFTC.
Bloomberg Found $200 Million in Suspicious Wagers on Kalshi and Polymarket. An Army Sergeant Has Already Been Indicted.
A Bloomberg investigation identified approximately $200 million in wagers on Kalshi and Polymarket between January and June 2026 displaying characteristics associated with potential insider trading — concentrated in geopolitical event markets. A federal indictment unsealed in April charged US Army Master Sergeant Gannon Ken Van Dyke with using classified information about Operation Absolute Resolve, the operation that captured Venezuelan President Nicolás Maduro, to generate $409,000 in profit. 57% of wallets with unusually successful returns were created within 24 hours of placing bets. The House Oversight Committee has launched a formal investigation.