Massachusetts Judge Signals Broad Limits on Kalshi Sports Contracts

A Massachusetts judge has given the clearest signal yet of how far he is willing to go in restricting Kalshi’s sports event contracts in the state. His preliminary outline points toward a narrow but firm injunction that would rely heavily on geofencing and other technological controls, rather than broad bans or marketing restrictions.

Judge Signals Narrow, Tech-Focused Restrictions for Kalshi

In a set of “preliminary views” released this week, Massachusetts Superior Court Judge Christopher Barry-Smith indicated that Kalshi will likely be required to ensure its sports-related contracts are not offered “directly or indirectly” to anyone in Massachusetts. Given Kalshi’s nationwide business model, the court made clear that residency-based restrictions would not be sufficient, pointing instead to the use of location-based technology.

Barry-Smith also signaled little sympathy for Kalshi’s request for a 90-day compliance window. Instead, the judge said the company would have just 30 days to implement the required controls once the injunction is finalized. The court noted that Kalshi has had months to prepare for this possibility, referencing prior regulatory warnings, including a Commodity Futures Trading Commission notice issued in late September 2025 that encouraged contingency planning for state enforcement actions.

While the injunction would be strict on future activity, the judge drew an important line when it comes to existing contracts. The proposed framework would allow users to exit positions they already hold, but not expand them.

Under the court’s preliminary framework:

• Kalshi would be barred from offering new sports event contracts to Massachusetts users
• Increasing the size of an existing position would be treated as a new contract and prohibited
• Selling or settling existing contracts would remain permitted
• Fees collected when contracts are settled would still be allowed
• Compliance would be enforced through technological controls, not licensing or account bans
  

Existing Contracts Can Be Sold, But New Bets Blocked

That approach splits the difference between the Commonwealth and Kalshi. Massachusetts regulators had argued that all trading of existing sports contracts should be frozen, while Kalshi countered that such a move would undermine the core function of an exchange. Barry-Smith’s proposal preserves liquidity for existing positions while preventing new exposure.

The judge also rejected broader restrictions sought by the state. Kalshi would not be required to shut down accounts, block access to its non-sports markets, or alter its national marketing campaigns. Instead, notice to Massachusetts users would only be required when someone attempts to place a prohibited sports contract.

The timeline now moves quickly. Both sides have until February 4, 2026, to submit a proposed preliminary injunction order. If the parties cannot agree on the scope or wording, Barry-Smith said he would either issue the injunction himself or schedule another prompt hearing.

Running parallel to that process is Kalshi’s emergency request for a stay pending appeal. Kalshi continues to argue that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over its contracts, preempting state gambling laws. The judge indicated he expects to address the stay request on the same general timeline as the injunction, with a decision likely within the next two to three weeks.

The Massachusetts case has become a key test for the prediction market industry. It is the only state where regulators have secured early victories in state court, and a forced geofence in Massachusetts could embolden similar efforts elsewhere. For now, Barry-Smith’s preliminary views suggest a future where prediction markets may be allowed to operate—but only within increasingly firm state boundaries.

Alex Warren

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