A Massachusetts judge has allowed state authorities to expand their lawsuit against prediction markets platform Kalshi, extending the legal fight over whether the company’s sports event contracts should be regulated as online sports wagering.

In a Tuesday filing in Suffolk County Superior Court, associate justice Peter Krupp permitted Massachusetts regulators to submit a 71-page amended complaint, adding new allegations to the state’s initial case that Kalshi violated Massachusetts law by offering sports-related wagering without the required authorization.

Key takeaways

• A Massachusetts judge allowed the state to file a 71-page amended complaint against Kalshi, keeping the case active.
• The expanded allegations claim Kalshi’s product effectively functions as sports wagering and that its marketing may reach people under 21.
• Massachusetts’ argument hinges on whether Kalshi must be licensed through the Massachusetts Gaming Commission to comply with state rules.
• The dispute also sits within a wider US battle over whether the CFTC has “exclusive jurisdiction” over prediction markets.
• Gaming and tribal groups are separately pushing Congress for clearer rules through the CLARITY Act.

Expanded allegations in the Massachusetts case

The Tuesday ruling clears the way for Massachusetts authorities to strengthen their claims as the case continues. According to the court filing, the amended complaint builds on earlier allegations that Kalshi engaged in sports wagering in a way that violates state law.

The state’s updated pleading includes accusations that the platform “targets those under 21 years of age” and does not do enough to prevent underage users from accessing the product. The complaint points to Kalshi’s marketing practices and to ad creative that, the filing alleges, shows individuals who appear younger than 21.

Massachusetts authorities also reiterated that Kalshi permits users from age 18 to create accounts and place wagers on sports events by purchasing event contracts, framing that accessibility as incompatible with the state’s approach to online sports wagering.

How the dispute started—and what the judge previously ordered

Massachusetts Attorney General Andrea Joy Campbell announced the lawsuit in September 2025, arguing that Kalshi needed to be licensed by the Massachusetts Gaming Commission to comply with state rules governing online sports wagers.

Earlier developments escalated the dispute quickly. In January, a judge issued a preliminary injunction barring Kalshi from offering sports event contracts while the case was reviewed.

With the latest amended complaint allowed by the court, Kalshi now faces a more detailed version of the state’s allegations as it continues fighting the legality of its sports contracts under Massachusetts law.

Cointelegraph reached out to Kalshi for comment, but did not receive an immediate response. After the initial complaint was filed, a Kalshi spokesperson had said the company was “ready to defend” itself in court.

The federal-versus-state jurisdiction fight over prediction markets

The Massachusetts case is only one part of a broader regulatory tug-of-war in the US. In parallel with state-level enforcement efforts, the CFTC has supported the view that prediction markets fall within its authority.

In April, the CFTC filed a brief in Massachusetts arguing that it had “exclusive jurisdiction” over prediction markets. The agency’s position, under Chair Michael Selig, is that event contracts offered by platforms like Kalshi are “swaps” under the Commodity Exchange Act and therefore should not be governed by state regulation.

As Selig put it in remarks associated with the agency’s stance, Congress has entrusted the CFTC with sole authority to regulate commodity derivatives markets, including prediction markets—and he warned that states attempting to override federal law would face legal challenges.

Why this matters beyond Kalshi: a policy push for the CLARITY Act

Even as the legal arguments could eventually move toward higher courts, some industry and stakeholder groups are urging lawmakers to address the jurisdictional uncertainty with legislation.

Earlier this month, national gaming and tribal organizations and labor groups asked US senators to add language to the Digital Asset Market Clarity (CLARITY) Act. Their request is aimed at explicitly prohibiting event contracts tied to sports and casino-style gaming.

The CLARITY Act—currently under consideration in the Senate—is expected to shape how the CFTC’s authority over digital assets and related market activities is defined. In that context, stakeholders pushing for restrictions on sports and casino-style event contracts are effectively seeking legislative clarity to reduce the need for repeated state-by-state court battles.

Cointelegraph has also reported that the legal landscape for Kalshi and similar platforms has varied by jurisdiction, including instances where the company was blocked from offering sports bets in certain locations.

What to watch next

For market participants and platform users, the next key developments are procedural and strategic: Massachusetts will attempt to sustain its expanded claims after the preliminary injunction, while Kalshi’s defense will likely continue confronting the CFTC’s argument for exclusive federal oversight. At the same time, the direction of the CLARITY Act could determine whether US prediction markets face a patchwork of state litigation or a more uniform regulatory framework.

Key takeaways:

• The Spot Ether ETF outflows overwhelmed BitMine’s ETH accumulation, raising the chance of a drop below the $1,500 support.
• Falling DApps revenue and weak staking yields highlight limited ecosystem incentives despite tokenization potential.

Ether (ETH) has failed to sustain prices above $1,600 since Thursday, following the broader cryptocurrency market’s downtrend. Lower oil prices created a positive tone that fueled investors’ hopes for more expansionist monetary policy. That setup favors stocks and pushes bond yields higher.

Traders now fear that ETH will not hold the $1,500 support level for long. Spot Ether ETF outflows void the impact of accumulation from Ether treasury companies.

ETH/USD (orange) vs. Total crypto market cap (blue). Source: TradingView

Ether price has declined 31% since May and underperformed the total cryptocurrency market capitalization by 8% over that period. US-listed Ether ETFs saw $345 million in net outflows since June 17, which more than offset the $182 million in ETH accumulation from BitMine Immersion (BMNR US) and Sharplink (SBET US) during the same period.

Regulatory setbacks, AI competition and weak Ethereum onchain metrics

Several factors appear to have held back investor appetite, including regulatory uncertainty in the United States. Meanwhile, the stock market continues to draw attention thanks to strong earnings and lower inflation expectations.

The Digital Asset Market CLARITY Act has awaited a Senate vote since May 15. The bill ends regulation-by-enforcement and clarifies which tokens count as securities. Yet it has faced pushback from lawmakers over provisions regarding stablecoin yields and anti-money-laundering standards.

Democratic lawmakers voiced ethical concerns about the Trump family’s ties to crypto and its role in the World Liberty Financial platform. Most view the CLARITY Act as a positive catalyst for the decentralized finance (DeFi) sector. So ongoing uncertainty around approval hurts institutional demand for ETH.

The artificial intelligence sector now competes with blockchain for data processing as cloud providers deliver services through agentic architectures. Enterprise software leader SAP (SAP DE) has integrated autonomous, modular AI agents natively across multi-vendor clouds, enabling peer-to-peer collaboration.

Ether investors also feel disappointment from stagnant Ethereum network fees and decentralized applications (DApps) revenues. As a result, ETH supply becomes inflationary, staking yields remain limited, and fewer incentives exist for ecosystem growth, since part of DApps’ revenue flows back to users.

Ethereum monthly network chain fees vs. DApps revenue, USD. Source: DefiLlama

Ethereum network fees reached only $10.7 million in June, down from $24.4 million in April. DApps revenue hit $51.7 million in June, down from $64.8 million two months earlier. Top contributors included Sky (formerly Maker) at $12.7 million, Titan Builder at $7.2 million, and Chainlink at $4.6 million.

Ethereum supporters argue that tokenization remains in its early innings. The long-term growth potential should create enough blockchain demand to support a much higher ETH valuation.

Related: Ether treasury Sharplink bought $62.4M ETH last week

Ethereum real world assets (RWA) active market capitalization, USD. Source: DefiLlama

While real world assets (RWA) show real promise, the $14.5 billion in tokenized market cap on Ethereum has yet to spark meaningful DeFi activity. With a 2.7% staking yield and weak onchain metrics, the odds of ETH breaking below $1,500 remain in play.

Prediction markets platform Kalshi’s legal battle against Massachusetts will continue after a judge ruled that state authorities could add allegations against the company over sports betting.

In a Tuesday filing in Suffolk County Superior Court, associate justice Peter Krupp allowed state authorities to file a 71-page amended complaint, building on a filing alleging that Kalshi engaged in sports wagering in violation of state laws. 

The amended complaint included allegations that Kalshi “targets those under 21 years of age and does little to stop them from using its platform,” citing the company’s marketing to university campuses and presenting images in ads of people who “appear to be younger than 21 years old.”  

“Kalshi allows anyone who is at least 18 years old to create an account and wager on sports events by purchasing event contracts,” alleged Massachusetts authorities.

Source: Massachusetts Superior Court

Massachusetts Attorney General Andrea Joy Campbell announced the lawsuit against Kalshi in September 2025, alleging that the company needed to be licensed by the Massachusetts Gaming Commission to comply with state laws on online sports wagers. In January, a judge granted a preliminary injunction barring Kalshi from offering sports event contracts as the case was under review.

Related: US senators push to end CFTC ‘assault’ on state oversight of prediction markets

The Massachusetts case is just one of many involving state-level authorities and prediction markets companies like Kalshi and Polymarket, who offer users the ability to trade using event contracts on a variety of outcomes related to sports, politics and current events. 

While Kalshi has been blocked from offering sports bets in some jurisdictions, it also has support from the US Commodity Futures Trading Commission (CFTC), which in April filed a brief in Massachusetts arguing the agency had “exclusive jurisdiction” over prediction markets. The CFTC, under Chair Michael Selig, has claimed that event contracts on the platforms amount to “swaps” covered by the Commodity Exchange Act and were not subject to state regulation.

“Congress has entrusted the CFTC with the sole authority to regulate commodity derivatives markets, including prediction markets,” said Selig. “To any state that seeks to nullify federal law and seize authority over these markets, I say again: we will see you in court.”

Cointelegraph reached out to Kalshi for comment but did not receive an immediate response. Following the initial complaint in September, a spokesperson said that the company was “ready to defend” itself in court.

Gaming organizations look to CLARITY Act for clarity on prediction markets

While one of the cases between a prediction markets platform and US state authority could ultimately reach the US Supreme Court given the arguments over federal and state laws, some groups are looking to Congress for solutions.

Earlier this month, national gaming and tribal organizations and labor groups called on US senators to add language “that explicitly prohibits event contracts tied to sports and casino-style gaming” to the Digital Asset Market Clarity (CLARITY) Act. The bill, under consideration in the Senate, is expected to give the CFTC more regulatory authority over digital assets.

Magazine: Does ‘Paper Bitcoin’ mean there’s an unlimited supply of BTC?

With Bitcoin plunging below $60,000 and Strategy’s share price down by more than 70% from the high, some crypto investors are questioning if Strategy could become this cycle’s Terra/LUNA — a highly leveraged bet on crypto market structure that explodes under stress.

The company’s response? A new capital framework released on Monday aimed at addressing investors’ fears.

The package includes up to $1 billion in buybacks for MSTR, up to $1 billion in buybacks for STRC and related securities, an increase in STRC’s dividend to roughly 12%, and a cash buffer expansion to $2.55 billion.

Of particular note for a company famed for its maximalist approach to Bitcoin, Strategy also said it may sell up to $1.25 billion in BTC holdings if required to meet dividend or debt obligations.

Markets responded positively to the news, with both STRC and MSTR shares rallying more than 12% in after-hours trading. STRC is currently trading at $84.86, a significant improvement on the $72.06 it was trading at on June 26.

STRC share price rallied by over 12% in after-hours trading. Source: Yahoo Finance.

But is the plan enough to assuage fears that STRC’s structure — famously cooked up by CEO Michael Saylor with the help of an LLM — could expose Strategy to a “death spiral” of reflexive funding risks during periods of market stress?

What is STRC and why is it controversial?

STRC is part of Strategy’s capital structure linked to its broader Bitcoin treasury strategy. It sits between traditional equity and debt-like instruments, offering investors yield while maintaining exposure to the company’s Bitcoin holdings.

Related: Strategy’s MSTR may plunge 80% if it repeats this dot-com-era fractal

Strategy describes STRC as a perpetual preferred stock paying a 12% annual dividend on a $100 par value, funded from its cash reserve and Bitcoin-linked capital framework.

While the structure is designed to provide financing flexibility without issuing traditional debt, analysts have questioned whether its stability depends on continued investor demand in secondary markets, particularly during periods of Bitcoin volatility or tighter liquidity conditions.

By contrast, Strategy’s common stock is called MSTR and it represents an equity ownership stake in Strategy along with voting rights. The fate of the two securities is closely aligned, but they are different. Similarly, Strategy’s position as the largest buyer of Bitcoin (and perhaps in future as a seller) means its fate is closely intertwined with the price of Bitcoin at present.

Perpetual goldbug and Bitcoin critic Peter Schiff has repeatedly called out Strategy’s model, pointing out that it “can’t sell Bitcoin without crashing the price of Bitcoin. Even if Strategy merely stops buying Bitcoin, that change alone would crush the market.”

Strategy describes STRC as a short-duration, high-yield credit. Source: Strategy

Yet Taran Dhillon, head of digital assets at Kula, told Cointelegraph that “Bitcoin volatility alone is unlikely to break a structure like Strategy’s.”

He said that a more meaningful test is “whether Bitcoin remains under pressure while access to capital becomes progressively more expensive or difficult.”

The Bear case: feedback loops and liquidity dependency

Some argue that Strategy’s entire fundraising and equity model is inherently reflexive, compounding both upside and downside cycles. The same flywheel that amplifies gains in bull markets can accelerate losses during the bear, when falling Bitcoin and share prices collide with weaker demand.

Ripple CEO Brad Garlinghouse made that exact point on CNBC this week. “Financial engineering does not drive long term value,” he said.

Kyle Rodda, senior analyst at Capital.com, told Cointelegraph that Strategy effectively operates as a momentum-driven Bitcoin accumulation vehicle, in which capital raises funds for Bitcoin purchases that, in turn, support the company’s valuation. However, he warned that the dynamic can reverse under stress.

“Strategy’s business definitely compounds momentum in both directions,” Rodda said, adding that in weaker conditions, rising funding costs and declining investor appetite can reinforce downward pressure.

Related: Grayscale’s Pandl says Strategy should sell $3B Bitcoin to restore confidence

He also argued that secondary market liquidity is a structural dependency, meaning large-scale selling or refinancing pressures could have wider spillovers into Bitcoin markets themselves.

Among Bitcoiners, Charles Edwards, the founder of Capriole Investments, is one of Strategy’s most hawkish commentators of late.

He compared stressed conditions in digital asset treasury companies to broader crypto deleveraging events, warning that feedback loops can accelerate losses when leverage and sentiment deteriorate.

“Anyone else getting LUNA 2022 vibes on MicroStrategy?” he posted on June 26.

Comparing Strategy to Terra/LUNA. Source: Charles Edwards

The neutral view: the real risk is funding markets, not Bitcoin

While the bearish sentiment around Strategy piles up on X, Dhillon told Cointelegraph that stress would likely first appear in funding conditions, pointing to widening discounts, higher yields, and reduced issuance capacity as early warning signals.

In his view, Strategy’s Bitcoin holdings are less relevant than whether the company can continue refinancing or rolling capital efficiently during periods of market stress.

And while failure of STRC to maintain its “peg” of $100 has caused much consternation, STRC isn’t pegged to $100 in the way a stablecoin is pegged to the value of $1. The yield simply gets more attractive the further the price falls under $100, which in theory, should see buyers push the price back to $100 at some point.

A Bitfire Research report shared with Cointelegraph said that STRC’s recent price dislocations should not be interpreted as structural failure.

The firm argued that de-pegging events are largely driven by sentiment and liquidity conditions rather than changes to Strategy’s underlying fundamentals or solvency profile.

“Strategy (formerly MicroStrategy) faces no near-term insolvency risk,” the firm wrote.

Bull case: stress is not insolvency

Strategy supporter Adam Livingston, a Bitcoin advocate and author, ran what he described as a “three-year MSTR stress test” under extreme conditions, including a 55% Bitcoin drawdown, closed capital markets, and sustained cash burn requiring large Bitcoin sales to meet obligations.

Related: CryptoQuant warns on Strategy’s dividend coverage as cash reserve falls 38%

In his model, Strategy’s senior claims expand sharply in Bitcoin terms, while the company’s “common equity Bitcoin exposure” (CEBE) compresses significantly. He described this as “CEBE getting annihilated”, falling from 138,161 sats per share to 7,884 sats per share at the trough of the simulation.

Death spiral? This model says no. Source: Adam Livingston

The model assumes no new Bitcoin purchases or equity issuance during the downturn, with approximately 115,727 BTC sold over the three years to service obligations before stabilization conditions return.

Despite the severity of the drawdown, Livingston’s model ultimately shows Strategy surviving the cycle, ending with over 700,000 BTC remaining on its balance sheet and a recovering net asset structure once market conditions normalize.

What Strategy actually changed

The new framework represents the most explicit attempt yet by Strategy to address concerns around liquidity and reflexivity risk.

Key components of Strategy’s June 29 8-K filing that aim to restore confidence in the company, include buybacks for MSTR shares and STRC and a big focus on expanding cash reserves to pay dividends. The nuclear option of selling up to $1.25 billion in Bitcoin holdings to pay dividends is included partly as a way to assure markets Bitcoin maximalist Michael Saylor will reluctantly sell assets if he’s forced to.

Related: Bitcoin price is down over 40% since STRC launched: Is Strategy ‘fine’?

Strategy’s 8-K filing, June 29. Source: US Securities and Exchange Commission

Dhillon said the framework “meaningfully improves” transparency around how Strategy would respond under stress, with the expanded $2.55 billion reserve and clearer Bitcoin monetization plan helping strengthen investor confidence.

But Schiff pointed out that the current market cap of MSTR is $30 billion, while the current value of its Bitcoin is $50 billion. “Until MSTR’s market cap rises above the value of its Bitcoin, any Bitcoin bought by issuing MSTR shares creates a negative Bitcoin yield,” he said.

A stronger toolkit, same core bet

While the framework strengthens Strategy’s ability to manage short-term stress, it does not eliminate its reliance on capital markets to sustain its broader Bitcoin accumulation strategy.

As Dhillon told Cointelegraph, the key test will be whether funding conditions remain accessible during periods of market stress, rather than Bitcoin price action alone.

He added that the update clarifies Strategy’s capital allocation playbook, and gives management a more defined order of operations, which makes its overall strategy more credible.

For critics like Rodda, the underlying concern persists. Strategy’s structure remains exposed to feedback loops if liquidity tightens across both equity and credit markets.

While Strategy’s move introduces clearer liquidity buffers, buybacks, and contingency options, including potential Bitcoin sales, the debate over structural reflexivity has not yet been fully resolved.

The question now is not whether STRC is inherently fragile in theory, but whether Strategy’s expanded toolkit can withstand a prolonged period of capital market stress, and whether investors still want exposure to a vehicle that amplifies Bitcoin’s cycles and adds risk, rather than simply tracking them.

Magazine: Bitcoin will not hit $1M by 2030, says veteran trader Peter Brandt