Kalshi Sues New York State Gaming Commission
Kalshi, a federally regulated prediction market based in Manhattan, has filed a lawsuit against the New York State Gaming Commission (NYSGC). The commission ordered Kalshi to shut down its sports-event contracts in New York immediately.
On October 24, New York regulators sent Kalshi a cease-and-desist letter. They claimed the company’s sports markets are illegal gambling under state law. The letter warned Kalshi of potential civil fines and criminal penalties.
The notice, issued under New York’s racing laws, identified 20 of Kalshi’s federally self-certified contracts as unlawful.
In response, Kalshi argues that New York does not have the authority to make this ruling. The company states that the U.S. Commodity Futures Trading Commission (CFTC) regulates its markets at the federal level. Kalshi says federal law gives the CFTC exclusive control over derivatives and swaps trading on licensed exchanges.
Kalshi is asking a federal judge to prevent New York from enforcing state gambling laws against it.
Significance of the Legal Dispute
This case highlights a growing conflict between state and federal regulators over prediction markets. Kalshi claims its sports contracts are financial hedging tools, not gambling. They say the contracts function like derivatives based on real-world outcomes. New York disagrees and classifies them as unlicensed sports betting.
By filing the lawsuit first, Kalshi aims to keep the focus on federal preemption—the idea that federal law overrides state law—rather than arguing whether the contracts constitute gambling under state rules.
Kalshi also warns that blocking access in certain states could violate CFTC “Core Principles.” These principles require equal access to markets nationwide. Kalshi says this leaves it with a difficult compliance challenge.
Similar Legal Battles in Other States
Courts in several states have reached different conclusions on Kalshi’s contracts. Kalshi won early rulings in New Jersey and Nevada but lost in Maryland, where a judge told it to stop offering sports contracts. Maryland has not shut down Kalshi’s platform while the case is ongoing.
Recently, a Nevada judge ruled against Crypto.com. The judge said sports results do not qualify as swaps under federal law. This allows Nevada regulators to treat the contracts as gambling. Crypto.com must block Nevada users and close open positions during its appeal. The company has a November 3 deadline to geofence Nevada users.
Illinois has begun warning operators about prediction markets. This suggests more states might follow New York’s example.
