By Bowen Yu, Florida State University
Introduction
On January 20, 2026, the Massachusetts Superior Court issued an important order in the case of Commonwealth of Massachusetts v. KalshiEX, LLC. In this case, the Plaintiff is the Commonwealth of Massachusetts, and the Defendant is KalshiEX, LLC (“Kalshi”)[5]. Judge Christopher K. Barry-Smith granted the state’s request for a preliminary injunction against Kalshi. Kalshi operates a prediction market accessible via its mobile app and third-party platforms like Robinhood. The company allows users to trade event contracts by purchasing yes or no positions on specific outcomes, such as the winner of a sporting event. Unlike traditional stock markets, where asset prices can fluctuate indefinitely based on company performance, Kalshi’s trading structure is distinct and binary. The combined price of the yes and no positions always totals one dollar. After the event occurs, the user holding the correct position receives the full one-dollar payout, while the opposing contract expires worthless. This fixed-odds, all-or-nothing payout structure mirrors the mechanics of traditional sports betting, which drew the scrutiny of state regulators.
This court order stops Kalshi from offering contracts on sports outcomes, such as football games, to users in Massachusetts unless it obtains a state gaming license. The legal dispute began because Kalshi offered these sports event contracts without an issued Massachusetts sports wagering license. Kalshi tried to defend its actions by arguing that it is already regulated by the federal Commodity Futures Trading Commission (CFTC). The company claimed that federal financial laws should overrule, or preempt, state gambling laws. However, the judge rejected this defense. The court explained that states have a traditional right to regulate gambling to protect the public. Because federal law does not explicitly remove this power, the judge ruled that Kalshi must comply with state licensing rules.
This ruling is grounded in the established legal framework for injunctive relief, which requires satisfying two specific prerequisites: likelihood of success on the merits and the public interest.
Likelihood of Success on the Merits.
To grant the preliminary injunction, the judge first had to determine the likelihood of success that the Commonwealth would prevail in a final trial. Since Kalshi did not deny that it offers sports wagering contracts and second, Kalshi did not deny that it did not have the required Massachusetts license, its defense relied entirely on preemption, which is the legal theory that federal law supersedes state authority. The judge, however, rejected this argument after analyzing it through two angles.
First, the court addressed field preemption, dismissing Kalshi’s claim that the federal Commodity Exchange Act grants the federal government exclusive control over the industry. He noted that federal law respects this authority rather than displacing it. The court highlighted a “Special Rule”[6] in the CEA that allows federal regulators to ban specific event contracts if they involve activity that is unlawful under state law. This provision serves as proof that Congress intended for state laws defining legality to remain active and enforceable, rather than being swept away by federal jurisdiction.
And then for the conflict preemption, the judge dismantled Kalshi’s assertion that it is impossible to comply with both federal and state rules. He explained that federal registration and state licensing can coexist, remarking that Kalshi’s desire to avoid the “burden and expense” (p.14)[7] of licensure is not a valid legal excuse. Because the preemption defense failed, the court concluded that the Commonwealth is likely to succeed in proving Kalshi is operating illegally.
Public Interest.
The court determined that granting the preliminary injunction would promote the public interest. The judge emphasized that the Massachusetts Sports Wagering Law is designed to protect public health and safety by mandating licensure, taxation, and strict protocols to prevent gambling addiction and underage betting.
Specifically, the court pointed to the importance of the Massachusetts voluntary self-exclusion program. This is a state-managed tool that allows individuals struggling with gambling addiction to legally block themselves from all betting platforms statewide. By operating outside the licensing system, Kalshi was effectively providing a bypass for vulnerable individuals to continue betting without these necessary safety nets. Furthermore, the court noted that enforcement is essential for ensuring fair competition, requiring all operators to follow the same regulatory standards.
Although Kalshi argued that the injunction would damage its reputation and business viability, the judge found these claims unpersuasive, characterizing any potential harm as a problem “of its own making” (p.16)[8]. The court pointed out that the CFTC had explicitly warned Kalshi in September 2025 about potential state legal actions, yet the company chose to proceed despite the warning. Finally, the judge concluded that compliance with state regulations is a standard aspect of business operations and that requiring licensure serves the broader public good.
Conclusion and Order
Ruling in favor of Massachusetts, the judge concluded that the state had successfully demonstrated both a likelihood of winning at trial and that enforcing licensure requirements serves the public interest. Consequently, the court granted the preliminary injunction to stop Kalshi’s unlicensed operations and, at the same time, denied Kalshi’s motion to dismiss, as its federal preemption arguments were found meritless.
In the final order, the judge officially prohibited Kalshi from offering sports-related event contracts in Massachusetts without a valid license. Addressing practical concerns, the court noted that the parties must still resolve how to block new contracts without unfairly impacting users holding existing positions.
Discussion
This case clarifies the relations between federal and state power. Kalshi argued that its federal financial license from the CFTC should shield it from state rules. However, the judge claimed that gambling regulation is traditionally a state responsibility. The judge’s ruling is solid because he grounded it in strong precedents. He cited the Supreme Court’s decision in Murphy v. NCAA (2018) to confirm that regulating gambling is a core power of the state, not the federal government. He also pointed to a similar recent case, Kalshi v. Hendrick (2025), to argue that Congress never intended a massive “sea change”[9] that would secretly take this power away from states. Furthermore, by referencing Zuri-Invest v. Natwest (2001), the judge explained that federal financial rules and state safety laws do not have to conflict. Instead, they can coexist in harmony. This order sets a precedent for the future, showing other prediction markets that they cannot disguise sports gambling as financial trading to bypass local regulations.
Commonwealth of Massachusetts v. KalshiEX, LLC, No. 2584CV02525 (Mass. Super. Ct. Jan. 20, 2026).
