Michigan sues Kalshi, alleges app is skirting state’s gambling laws

Michigan Attorney General Dana Nessel has sued the parent company of Kalshi, the so-called prediction market platform that allows users to place wagers on future events.

In a lawsuit filed Tuesday, March 3, in Ingham County Circuit Court, Nessel's office alleged Kalshi has circumvented Michigan's gambling laws by offering users to trade contracts based on whether specific events will happen. The complaint argues Kalshi acts and operates like a gambling platform and should be subject to the same state laws that online gaming apps are.

Michigan isn't the first state to sue Kalshi, with nine others bringing litigation against the platform so far, according to Yahoo Finance. Kalshi officials have argued across other lawsuits that it's an exchange market, not a gambling site, since it offers commodity exchange regulation.

Some of the trending items on Kalshi's homepage Thursday afternoon included questions on whether Department of Homeland Security Secretary Kristi Noem would be ousted from her position by May or July, who would be the Republican nominee for Texas' U.S. Senate election this fall and when Boston Celtics star wing Jayson Tatum would return from an Achilles tendon injury.

Nessel said the platform is close enough to outright sports betting that it should be regulated under the same state laws online sportsbooks are. Since legalizing online gambling in 2021, the state requires betting platforms to be licensed by the Michigan Gaming Control Board. The lawsuit asks for a permanent injunction ordering Kalshi to stop operating in Michigan.

"Entities like Kalshi continue to circumvent the gaming prohibitions imposed by (state law) and, in so doing, threaten the health, safety, and welfare of Michigan citizens," the complaint states.

Kalshi officials didn't immediately return a request for comment on the lawsuit Thursday.

Prediction markets, like Kalshi and competitor Polymarket, have come under fire by some who argue the apps can monetize sensitive information. The New York Times reported there were more than 150 accounts that placed hundreds of wagers of at least $1,000 Feb. 27 that there would be a U.S. strike on Iran, a day before the U.S. and Israel launched a joint attack on the Middle Eastern nation. Experts told the Times that the late bets mirrored insider trading.

Although Nessel's lawsuit didn't target any platform besides Kalshi, other prediction markets didn't waste time jumping into litigation to sustain operations in Michigan. Parent companies of Polymarket and Robinhood, another platform trying to enter the prediction market scene, preemptively filed lawsuits Wednesday against Nessel and the Michigan Gaming Control Board in U.S. District Court for the Western District of Michigan, arguing the Kalshi case threatens their operations in the state.

The lawsuits could have major ramifications for how Michigan treats prediction markets, which have exploded as a financial frontier for users. Weekly trading volumes, or the money users are putting into prediction markets, have rapidly spiked: there is nearly $73 billion in total prediction market volume, according to ' data.