Louisiana sues Kalshi, Robinhood and other prediction markets in escalating regulatory fight

Louisiana is the latest state to take on prediction market platforms, joining a growing legal battle between states and the federal government over who has jurisdiction to regulate the industry.

On Thursday, Louisiana Attorney General Liz Murrill said she filed a lawsuit against platforms Kalshi, Robinhood, Polymarket, Forecastex, Crypto.com, Coinbase, Novig, Underdog, Gemini and Prophetx for breaking the law.

"For too long, they have violated our laws with impunity," Murrill said in a post on X. "No longer: I am seeking an immediate restraining order and an injunction to restore the rule of law in Louisiana."

Louisiana is now the 11th state to sue one or more prediction markets following Arkansas, Utah and Connecticut, among others. And platforms have fired back. Following the lawsuit on Thursday, Kalshi filed an emergency temporary restraining order in preparation.

"Based on recent discussions with representatives of the state of Louisiana, Kalshi believes that the State will initiate an action against Kalshi in state court to restrict Kalshi from operating in Louisiana," Kalshi said in its court filing.

Prediction markets became massively popular following the 2024 presidential elections, with some of the biggest platforms now worth billions of dollars. States have generally taken issue specifically with sports betting and say that platforms are operating illegally and are avoiding paying taxes. The issue also brings up concerns among tribal organizations about how the platforms could circumvent agreements.

Meanwhile, platforms have argued that the Commodity Futures Trading Commission should be in charge of regulating the platforms, including sports betting. The CFTC has also sued states to get "exclusive jurisdiction," which could later make its way up to the Supreme Court.

On Thursday, a Robinhood spokesperson asserted that its event contracts are federally regulated by the CFTC in response to Louisiana's lawsuit.

"As we've previously shared, Robinhood's event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity, allowing retail customers to access prediction markets in a safe, compliant, and regulated manner," the spokesperson told The Block.

A Coinbase spokesperson called states' approach fragmented. 

"Louisiana's lawsuit, filed while multiple federal appellate courts actively consider the same issues, is another example of the fragmented enforcement Congress sought to prevent when it gave the CFTC exclusive jurisdiction over event contracts," the spokesperson said in an emailed statement. 

The Coalition for Prediction Markets, which represents several of the platforms sued on Thursday, said the lawsuit was "troubling and unlawful." 

"Louisiana’s attack on this industry is a troubling and unlawful attempt to assert state authority over markets governed by federal law that would only cut off people’s access to an important tool for gathering market information, expressing informed views, and hedging risks based on their own expertise," that spokesperson said. "That cannot stand."

Separately, CNBC reported on Wednesday that the CFTC is investigating whether Kalshi failed to inform the CFTC properly about its proposed event contracts.  This comes soon after Reuters reported that the CFTC is investigating Polymarket over whether it violated a deal made in 2022 to promise to ban U.S. users from its flagship overseas platform.

Updated at 10:10 p.m. UTC to include comments