Kalshi and the state of Montana have reached a mutual agreement to dismiss a high-stakes lawsuit that challenged the state’s authority to regulate the multi-billion-dollar prediction market under local gambling laws. The move marks a cooling of tensions, though legal experts warn that the dispute remains a volatile issue that could reignite depending on future judicial developments.
The lawsuit, which dates back to April, centered on Montana’s attempt to enforce its gambling regulations on Kalshi after the platform began offering “event contracts” tied to sports outcomes in early 2025. Montana was one of 19 states to take enforcement action against the company, categorizing these prediction markets as unauthorized sports betting.
Michael McCann, a noted sports law expert and associate dean at the University of New Hampshire Franklin Pierce School of Law, characterized the entry of sports-based prediction markets as a “game changer” for the industry. While Kalshi markets itself as a CFTC-regulated exchange—likening its event contracts to stock market assets rather than wagers—regulators have been skeptical.
“It certainly seems a lot like betting,” McCann explained. “At the end of the day, it’s about making a prediction… and that’s a bet.” However, he noted a distinct structural difference: unlike traditional sportsbooks, where a “house” sets the odds, Kalshi’s market is peer-to-peer. Users determine the value of the contracts, a nuance that Kalshi’s legal team has leveraged to argue that their platform operates outside the purview of traditional state gambling statutes.
The regulatory landscape has been fractured by conflicting appellate rulings. Recently, a three-judge panel in the 9th U.S. Circuit Court of Appeals ruled unanimously against Kalshi in cases involving Nevada and California tribes, affirming that states possess the authority to regulate the platform. Conversely, the 3rd U.S. Circuit Court of Appeals ruled in favor of Kalshi in a New Jersey case, creating a split that legal analysts believe could eventually force the U.S. Supreme Court to intervene.
In the Montana case, both parties filed a joint stipulation for dismissal this past week. Under the agreement, the claims against the Montana Lottery Commission were dismissed with prejudice, barring any future litigation on that specific front. However, the dismissal of claims against the Montana Department of Justice was made without prejudice, leaving the door open for the state to pursue future legal action if national precedents shift.
“We are pleased Kalshi agreed to dismiss the lawsuit while we wait on a decision from the Ninth Circuit Court of Appeals in the related case,” Montana DOJ spokesperson Amanda Braynack said in a statement.
For now, Kalshi’s sports products remain available in Montana and operate outside of state-mandated gambling regulation. As higher courts continue to wrestle with whether these platforms represent a new financial frontier or merely a digital iteration of a traditional sportsbook, Montana officials remain prepared to reconsider their stance should the legal winds shift in the coming months.
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