Michigan AG sues Kalshi over alleged illegal sports betting
Michigan Attorney General Dana Nessel has filed a lawsuit to shut down Kalshi, a prediction market platform. Nessel argues that it is illegally offering sports betting in the state. The complaint, submitted Tuesday in Ingham County Circuit Court, alleges Kalshi operates without the licence required under Michigan law.
In a press release, she said that corporations cannot avoid state gaming laws. Those who dodge Michigan’s consumer protections are accountable and to make sure that betting in the state remains lawful, fair and subject to the oversight of what the residents expect and deserve, as reported by several media outlets.
Alleged violations
According to the suit, it alleges that Kalshi violated Michigan’s Lawful Sports Betting Act, which requires platforms to be licenced through the Michigan Gaming Control Board (MGCB). Enacted in December 2019, the law covers online and retail betting on professional and collegiate sports, with revenues directed to the Internet Sports Betting Fund to support regulation, enforcement, and consumer protection.
According to the complaint, roughly 90 percent of Kalshi’s trading volume involves sports wagers. The state argues that only licenced casinos and federally recognised tribal operators can apply for sports betting licences, and Kalshi does not qualify.
Under Michigan’s Lawful Sports Betting Act (Act 149 of 2019), violations can lead to criminal charges, fines, and injunctions. Unlicenced operators face misdemeanour or felony penalties depending on the severity, along with potential court-ordered shutdowns and financial restitution, as stipulated in the Michigan legislature.
How Kalshi operates
Kalshi’s prediction markets, along with other similar platforms, allow users to buy contracts—prices range between one and 99 cents—based on whether events will occur, from weather outcomes to sports championships. Regulators contend this structure functions as sports betting, bypassing Michigan’s licencing system and depriving the state of tax revenue.
Broader legal battles
Michigan is the third state to challenge Kalshi. Nevada’s Gaming Control Board issued a cease-and-desist order last year, upheld by a judge, while Massachusetts filed a similar lawsuit. Despite state-level pushback, Kalshi has support from federal regulators. The Commodity Futures Trading Commission (CFTC) oversees prediction markets, and former CFTC Chair Michael Selig has defended the platform, arguing in a Wall Street Journal op-ed that states cannot undermine federal jurisdiction with bans.
This tension between the MGCB and the CFTC highlights a broader regulatory battle over who controls prediction markets.
National ripple effect
Michigan’s sports betting market generates hundreds of millions annually, according to media reports. Allowing Kalshi to operate outside the licencing system, the state loses tax revenue set aside for regulation, enforcement, and consumer protection. Additionally, without licencing, bettors also miss out on safeguards such as responsible gambling programmes and dispute resolution mechanisms.
A ruling against Kalshi could strengthen states’ authority to regulate prediction markets as gambling, even when federal regulators classify them as financial instruments. Success in Michigan may embolden other states to challenge federally regulated platforms, potentially restricting Kalshi’s business model nationwide.
The case raises a larger question whether fintech-style prediction markets can coexist with traditional gambling laws, or they be forced into a single regulatory framework.
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