Montana AG: Online prediction platform Kalshi violates state gambling laws

You might not want to place an online wager on who wins this court case if you live here in the Treasure State, but as of right now, you still can.

The Montana Department of Justice's Gambling Control Division recently sent a cease and desist order to the online prediction market platform Kalshi, saying that its activities violate Montana gambling laws and threatening criminal action.

In response, Kalshi has filed a lawsuit in federal court against Montana Attorney General Austin Knudsen and other state gambling control officials, saying that Montana's threatened actions violate federal law and certain aspects of the U.S. Constitution.

In essence, Kalshi says is doesn't call what it offers "gambling," as its CEO told Wired magazine a month ago. Rather, it bills itself as a "federally designated derivatives exchange."

Therefore, Kalshi calls its product "event contracts," which gives consumers a chance to wager on real-world events, everything from soccer matches to whether the leader of Venezuela will be ousted.

As such, Kalshi says its event contracts are "subject to exclusive federal oversight and critically, are lawful under federal law, and state gambling laws that seek to regulate them are preempted."

But Montana officials dispute that interpretation.

On April 6, the Montana Department of Justice's Gambling Control Division (which is overseen by Knudsen) sent Kalshi an order to cease and desist illegal gambling activities in the state.

"The GCD has conducted an investigation into Kalshi's activities in the State of Montana, and in considering the results of that investigation concludes that those activities constitute illegal gambling within the meaning of Montana law," the letter states. "Internet gambling, i.e. gambling through the use of communications technology that allows a person using money to transmit to a computer information to assist in the placing of a bet and corresponding information related to the display of the game, is a type of illegal gambling enterprise by definition (of Montana law)."

The letter continues by saying that the investigation determined that Kalshi's "event contracts" are gambling within the meaning of Montana law because participants who risk money or other things of value for a gain that is contingent in whole or in part upon lot, chance or the operation of a gambling enterprise.

The letter notes that Kalshi does not have a Montana gambling license and yet allows people in the state to place bets in its event contract program.

Also, the attorney general's office claims that Kalshi event contracts pertaining to sporting events violate Montana laws. That's because sports wagering in Montana is only legal when the operator is properly licensed by the state.

The letter states that the Gambling Control Division's goal is to "obtain voluntary compliance" with Montana gambling laws.

"To that end, we have issued this order to cease and desist to draw your attention to this matter rather than immediately proceeding with more direct enforcement actions," the letter states. "We ... expect you will voluntarily comply. Refusal to do so will result in legal action against Kalshi."

In its lawsuit, Kalshi alleges that Knudsen and the other officials are violating the supremacy clause of the United States Constitution, which essentially says that federal laws take supremacy over state laws.

Kalshi is asking a judge for a preliminary and permanent injunction prohibiting the state attorney general from enforcing any Montana laws that regulate Kalshi.

Apparently, Knudsen's office first sent a cease and desist order to Kalshi in March 2025.

Kalshi claims that they sent representatives to meet with Montana Department of Justice officials that year, and the two parties reached an agreement that Montana would "defer any enforcement" pending the outcome of legal proceedings in Nevada and any appeal to the 9th Circuit Court of Appeals.

The proceedings in Nevada are still ongoing, and the 9th Circuit is scheduled to hear arguments in that case this week.

The Montana Department of Justice said it is aware of the lawsuit, but they haven't been served yet.

According to NPR, Kalshi is facing a host of federal lawsuits. The Biden administration proposed a rule that would have outlawed Kalshi allowing bets on sports and elections, but Trump became president before that rule was implemented. Kalshi has since named Donald Trump Jr. as a strategic advisor.

MTN News first reported the existence of the lawsuit filed by Kalshi.