Kalshi sues Montana AG in high-stakes clash over prediction market legality
Montana says Kalshi contracts amount to illegal gambling. Kalshi says Montana has no lane here at all. That is the whole case in one line.
After a state investigation, the Montana Gambling Control Division sent a cease and desist order and said players risk value on outcomes tied to chance or a gambling enterprise. Kalshi answered with a federal lawsuit against Attorney General Austin Knudsen and other officials, asking for declaratory and injunctive relief to stop enforcement. The company argues its market falls under federal derivatives law and national CFTC oversight, not state gambling rules.
Kalshi also says its contracts are trades between users, not bets against the platform. Traders buy yes or no positions on real-world outcomes and can exit before settlement as prices shift. In the filing, company lawyers wrote:
"Because traders do not take a position against the exchange itself, traders' ability to hedge risk requires counterparties willing to assume risk in the hope of seeing a return."
The filing says Montana had earlier agreed to hold off while related Nevada litigation continued, but the state later sent another warning letter and raised the threat of legal action. Kalshi says that changed the risk level and forced the new case.
A wider pattern now sits behind the Montana fight. Reuters reported that the Trump administration, through the CFTC, has already sued Arizona, Connecticut, and Illinois over similar state efforts to police prediction markets. Reuters also reported that a federal judge in Tennessee temporarily blocked state action against Kalshi earlier this year. So Montana is not a one-off. It is part of a bigger state versus federal collision over sports event contracts and prediction markets.
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