Massachusetts Sets Precedent in Prediction Market Crackdown

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Massachusetts Takes Firm Action Against Prediction Market Calshi

Massachusetts has made a significant regulatory move against Calshi, a company involved in prediction markets, signaling a potentially wider impact beyond state borders. Massachusetts is challenging Calshi's operations without previously issuing any cease and desist notices—a strategy not employed by other states. This direct approach by filing a lawsuit in state court focuses specifically on the legality of the underlying event contracts under state law.

Up to this point, 12 lawsuits have been filed regarding the legality of these prediction markets, with recent trends in federal court decisions favoring state governments. Notably, six federal court decisions have supported the states, starting with a pivotal ruling in Maryland on August 1st. This decision denied Calshi's request for a preliminary injunction, a move that many states have followed. However, Massachusetts is the first state to secure an injunction preventing Calshi from offering event contracts within the state.

This development in Massachusetts could serve as a critical legal blueprint for other states considering similar actions against prediction market firms. By avoiding the preliminary cease and desist approach, Massachusetts may have crafted a more effective legal strategy to challenge the operation of companies like Calshi.