When regulators circle, companies call in heavy artillery. For prediction-market platform Kalshi, that artillery now includes Neal Katyal.
The former acting U.S. solicitor general has stepped into a widening courtroom fight as states move to rein in event-based trading platforms. This week, he appeared for Kalshi in a lawsuit targeting regulators in Utah, adding to a growing list of states—Nevada, Ohio, Maryland, Connecticut and Tennessee—where similar battles are unfolding.
At the heart of the dispute is a deceptively simple question: are these platforms offering financial instruments or running online sportsbooks in disguise?
Prediction markets allow users to trade contracts tied to real-world outcomes—elections, economic data, sports results. Analysts estimate the sector processed roughly $47 billion in trades last year. Operators argue their products fall squarely under federal oversight by the Commodity Futures Trading Commission. Several state authorities disagree, portraying the contracts as unlicensed gambling.
Kalshi’s legal stance is clear: federal law governs event contracts, and states cannot override that framework by labeling them wagers.
Rivals are building their own legal fortresses. Polymarket has retained high-profile litigators from Gibson, Dunn & Crutcher, while Coinbase is leaning on seasoned appellate counsel from Sullivan & Cromwell. Across jurisdictions, the fight is becoming a referendum on who controls the fast-evolving intersection of finance and gaming.
Katyal’s appearance comes on the heels of a major win at the U.S. Supreme Court, where he successfully challenged sweeping tariffs imposed by former President Donald Trump. That decision has triggered a separate legal surge—one measured not in contracts traded, but in refund claims filed.
Tariff Fallout Floods Trade Court
The Supreme Court’s tariff ruling has unleashed a wave of litigation at the U.S. Court of International Trade. Companies ranging from logistics giants to global cosmetics brands are scrambling to recover duties paid under the invalidated measures. More than 1,800 cases were already pending when the ruling landed; dozens more have followed, with hundreds reportedly in preparation.
Major trade practices are jockeying for position. Firms with heavy dockets before the court are discussing the creation of a plaintiffs’ steering committee—a coordinating body common in sprawling, multi-party disputes. Unlike mass tort cases, however, the incentive here is less about outsized fee awards and more about influence, strategy and proximity to the center of action.
For seasoned trade lawyers, the committee role carries prestige rather than a financial windfall. It’s a chance to shape the litigation architecture as thousands of claims move through the system.
Funding Fight: $32 Million Arbitration Award at Issue
Elsewhere in the legal-finance world, litigation funder Longford Capital has gone to a Texas business court seeking confirmation of a $32.3 million arbitration award against patent monetization company Arigna.
The conflict traces back to a funding arrangement struck in 2020. Longford says it poured more than $38 million into patent enforcement campaigns and was entitled to a share of proceeds from a later global settlement reportedly valued at $100 million. According to court filings, most of that settlement was diverted to an affiliate’s overseas account, with only a fraction routed through counsel’s client trust account.
Arigna disputes the claims, maintaining it was not bound by the funding agreement at issue and arguing that the settlement involved multiple entities beyond the scope of the arrangement. The company has signaled it will continue contesting enforcement efforts.
From prediction markets testing the limits of federal preemption to trade lawyers sorting through tariff aftershocks and funders chasing arbitration awards, the legal industry is once again proving that risk—whether political, financial or contractual—inevitably finds its way to court.
