Kalshi's payment processors face legal risk under Louisiana racketeering law

Louisiana's racketeering law puts Kalshi's payment processors at legal risk

Christopher Hebert's December 2025 letter to Louisiana sportsbooks was blunt: offering prediction markets on sports breaks state law and may cost operators their gaming licenses. That letter is now Exhibit A in a federal lawsuit Kalshi filed in the Western District of Louisiana, and the exhibit does a great deal of work.

The complaint names five defendants — Attorney General Liz Murrill, Governor Jeff Landry, Hebert himself, the Gaming Control Board's enforcement director, and the Louisiana State Police Gaming Enforcement Division. The breadth of that list is not accidental. Kalshi is not responding to a single regulator's overreach. It is mapping the full perimeter of a state enforcement apparatus that it believes will move against it.

The legal theory is preemption. Louisiana treats Kalshi's event contracts as "gambling by computer" under state law. Kalshi argues its contracts are federally regulated instruments traded on a CFTC-designated exchange, and that the Supremacy Clause places them beyond the state's reach. That argument has traveled through other circuits with mixed results, and the Fifth Circuit has not touched it. This case gives it a new venue and a new set of facts.

The facts here are more aggressive than in prior state disputes. House Bill 53, signed by Governor Landry in May 2026 and effective August 1, upgraded "gambling by computer" from a standard criminal offense to a racketeering predicate carrying up to fifty years' imprisonment. The same statute authorizes the attorney general to seek injunctions, freeze assets, and shut down websites — not just of the operator, but of payment processors, geolocation providers, and media affiliates. Kalshi's complaint names this explicitly, and it should. If Louisiana's classification holds, the exposure does not stop at Kalshi's balance sheet. It extends to every vendor in the transaction chain.

Louisiana's own statute contains an exemption for futures, commodities, and similar instruments traded on an exchange. Kalshi's argument is that its contracts fall squarely within that carve-out. The state's position, as articulated by Hebert, is that they do not — that what Kalshi offers is "exchange wagering," which state law classifies as sports wagering and reserves for LGCB-licensed operators.

That definitional dispute is the center of this case. The CFTC's designation of Kalshi as a registered exchange does not automatically answer it, because the state's argument is not that Kalshi lacks federal authorization — it is that federal authorization does not displace state gambling law when the underlying activity is wagering on athletic competition. Courts have not settled whether that argument survives preemption analysis when the federal regulator has affirmatively approved the contract type. The Fifth Circuit will now have to say something about it, or the district court will create the record that forces the question up.

What I have seen in enforcement disputes of this structure is that the asset-freeze provision is rarely invoked first — but its presence in the statute changes how every downstream vendor calculates its own exposure. Payment processors read racketeering statutes carefully. Geolocation providers do too. The practical effect of HB 53 may arrive before any court order does.