On March 3rd, 2026, Michigan Attorney General Dana Nessel, on behalf of the People of the State of Michigan and the Michigan Gaming Control Board (MGCB), filed a civil enforcement action against KalshiEx, LLC (Kalshi) in the 30th Judicial Circuit Court in Ingham County, Michigan. The complaint seeks a permanent injunction and order of abatement against the New York-based prediction market company, alleging that it is operating an unlicensed internet sports betting platform in violation of Michigan’s Lawful Sport Betting Act (LSBA), the Michigan Gaming Act, and the Michigan Penal Code (Nessel v. KalshiEx, 2026). The case raises a fundamental question that is becoming increasingly more prominent for state regulators across the country: at what point does a “prediction market” become illegal gambling?
Background
Kalshi was co-founded in 2018 and formally launched in July 2021, initially offering event contracts on macroeconomic topics such as inflation and unemployment. Users purchase “Yes” or “No” positions on whether a particular event will occur, with a fixed payout of $1 per contract if correct and $0 if incorrect. Prices fluctuate between $0.01 and $0.99 based on aggregate user sentiment, mimicking a trading market. Kalshi describes this model as a “dynamic pricing” system reflecting “the collective sentiment of its users regarding the likelihood of an event” (Nessel v. KalshiEx, 2026). In 2024, the company expanded into political event contracts before additionally moving into sports-related event contracts.
Michigan enacted the LSBA in December 2019 after recognizing that unlicensed internet sports betting was already occurring illegally in the state. Under the LSBA, internet sports betting may only be conducted by a licensed operator, and only commercial casinos licensed under the Michigan Gaming Control and Revenue act or federal authorized tribal casinos may apply for such license (Mich. Comp. Laws § 432.406, 2019). Kalshi, as a Delaware limited liability company, is ineligible to apply for a sports betting operator license under the LSBA. The MGCB announced an investigation into prediction market operators in April 2025 and subsequently warned licensed gaming entities in Michigan that operating prediction markets could jeopardize their access in the state (Sisk, 2026).
Michigan’s Claims
The complaint contains two primary counts against Kalshi. Count 1 alleges a direct violation of the LSBA and Count 2 asserts that Kalshi’s operation constitutes a public nuisance under common law.
Count 1: LSBA Violation
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