Louisiana Attorney General Liz Murrill filed a lawsuit on Thursday against ten prediction market platforms, including Kalshi, Robinhood, Polymarket, Forecastex, Crypto.com, Coinbase, Novig, Underdog, Gemini, and Prophetx. The state alleges these companies break local laws by operating without proper authorization. Murrill stated in a post on X that she is seeking an immediate restraining order and an injunction to restore the rule of law in Louisiana. This action makes Louisiana the 11th state to sue one or more prediction markets, following earlier legal actions by Arkansas, Utah, and Connecticut. The dispute centers on whether states or the federal government holds jurisdiction over the industry, which has grown significantly since the 2024 presidential elections.
State Claims and Platform Defense
State officials argue that platforms operate illegally regarding sports betting and avoid paying taxes, while tribal organizations worry about circumvented agreements. Kalshi responded by filing an emergency temporary restraining order in preparation for the state’s action. The company stated it believes the state will initiate an action in state court to restrict its operations. A Robinhood spokesperson asserted that its event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity. Platforms generally contend that the Commodity Futures Trading Commission should regulate the sector, including sports betting. The CFTC has sued states to secure "exclusive jurisdiction," a conflict that may eventually reach the Supreme Court.
Regulatory Investigations
The legal battle coincides with active investigations into major platform operators. CNBC reported on Wednesday that the CFTC is investigating whether Kalshi failed to properly inform the agency about its proposed event contracts. Reuters also reported that the CFTC is investigating Polymarket over whether it violated a 2022 deal promising to ban U.S. users from its flagship overseas platform. These probes highlight the complex regulatory environment surrounding billion-dollar platforms. Murrill emphasized that the platforms have violated state laws with impunity for too long. The outcome of this litigation will determine if state restrictions can override federal oversight for retail customers accessing these markets.
