Kalshi took legal action against the state of Louisiana by filing a lawsuit in federal court on October 23, marking a significant development in the ongoing litigation surrounding prediction markets. The lawsuit, initiated in the U.S. District Court for the Western District of Louisiana, responds to new legislation that criminalizes all unauthorized "gambling by computer." Kalshi is concerned that the enforcement of these laws could lead Louisiana officials to unlawfully attempt to shut down the company's sports event contracts.
In its complaint, Kalshi argues that Louisiana's actions would constitute a violation of the Supremacy Clause of the U.S. Constitution, which ensures that federal law takes precedence over state law. The lawsuit names several defendants, including Attorney General Liz Murrill, Governor Jeff Landry, and key figures from the Louisiana Gaming Control Board (LGCB) and the Louisiana State Police Gaming Enforcement Division.
Kalshi is seeking both temporary restraining orders and injunctions to prevent Louisiana from enforcing its laws against the company. In its filing, Kalshi cites several statements and actions taken by Louisiana officials since late 2022 as indicators of their intention to impede the company's operations. Evidence presented includes a December 2022 letter from LGCB Chair Christopher Hebert to licensed sportsbooks, warning that prediction markets violate state law and could jeopardize gaming licenses.
In the letter, Hebert stated, "Any event-style ‘contract,’ ‘swap,’ 'market' or other 'financial instrument' that allows individuals to stake value on the outcome of a sporting event, other than by a Board licensed or permitted sports wagering operator, constitutes illegal gambling." He also noted that Louisiana law classifies sports contracts as a form of gambling and explicitly mentions "exchange wagering" as part of sports wagering.
Kalshi's lawsuit enters the Fifth Circuit's jurisdiction and adds to ongoing cases in the Third, Sixth, and Ninth Circuits regarding prediction markets. The company highlights Louisiana's new law, effective August 2026, which criminalizes unauthorized digital gambling, as a major concern for its operations.
In 2026, Louisiana's legislature passed two pieces of legislation, House Bill 53 and House Bill 883, which Governor Landry signed into law. HB 883 forbids dual-currency sweepstakes and social gaming platforms and extends the definition of "gambling by computer." Meanwhile, HB 53 categorizes various gambling offenses, including "gambling by computer," as racketeering, carrying potential penalties of up to 50 years in prison.
Despite these laws primarily targeting illegal gambling operations, Kalshi fears the legal ramifications for its business. The lawsuit argues that the AG’s office can seek injunctions against violators, threatening to shut down websites and freeze assets linked to operators, processors, and affiliates.
Kalshi notes that Louisiana law criminalizes any business activity involving risks for profit, which applies to gambling by computer. The lawsuit states, "Defendants have made clear that they read those provisions to treat Kalshi’s federally regulated event contracts as unlicensed gambling by computer," despite the law’s stipulation that it does not restrict transactions related to stocks or similar financial instruments.
Given that sports betting is exempt from this ban for licensed operators, Kalshi claims the state has effectively threatened to eliminate its business operations within Louisiana. The company argues that its compliance with Louisiana’s licensing requirements would be impossible due to discrepancies with the Commodity Exchange Act. Kalshi emphasized that Louisiana's actions challenge the CFTC's exclusive authority to regulate designated contract markets and suggested that the state appears to disregard federal supremacy.
In its plea for relief, Kalshi stresses that a preliminary injunction is crucial to restore the necessary balance between state and federal authority as outlined by the Constitution.
As of now, attempts to reach Gov. Landry's office, AG Murrill, and the LGCB for comments on the lawsuit have gone unanswered.
