- Trending
- Comments
- Latest
Event contract trading platform Kalshi has filed a federal lawsuit against New York regulators, accusing the New York State Gaming Commission (NYSGC) of unlawfully attempting to shut down its operations. The firm’s Oct. 27 complaint, lodged in the Southern District of New York, follows a cease-and-desist order from the state’s top gambling authority earlier that week.
The NYSGC’s order, dated Oct. 24, alleged that Kalshi was “illegally offering sports wagering services” without a state license which is an accusation the company strongly denies. Kalshi argues that its event-based futures contracts, approved by the U.S. Commodity Futures Trading Commission (CFTC), fall strictly under federal jurisdiction and are not equivalent to gambling.
“The actions of New York regulators threaten immediate and irreparable harm not only to Kalshi but also to its users and partners,” the complaint states. The company claims that by invoking state gambling laws against federally regulated contracts, New York has violated the preemption principle established under the Commodity Exchange Act (CEA).
The Commodity Exchange Act governs all commodity and futures trading in the United States, granting the CFTC exclusive oversight over approved exchanges such as Kalshi.
Kalshi’s case hinges on its assertion that Congress explicitly intended the CEA to prevent state interference in federally regulated trading markets. The firm’s lawyers argue that the New York regulators have “overstepped their authority” by classifying sports-event contracts as gambling instruments.
“Kalshi’s desperation to get this case filed in federal court ASAP likely stems from the fact that New York State has a constitutional-level prohibition against sports gambling except through state-licensed casinos,” said Daniel Wallach, founder and principal at Wallach Legal LLC, in a post on X.
By filing in federal court, Kalshi hopes to avoid the limitations of New York’s state courts, where gambling prohibitions are deeply entrenched in the state constitution. Legal experts say the company’s strategy mirrors its prior litigation in other jurisdictions.
The lawsuit seeks injunctive and declaratory relief, which would prevent New York regulators from enforcing their cease and desist order while the case proceeds. Such relief would allow Kalshi to continue offering its federally approved markets from its Manhattan headquarters without interruption.
This approach is similar to cases Kalshi has fought in Nevada, New Jersey, and Ohio, where judges have temporarily blocked state interference pending federal rulings. In Nevada, Judge Andrew P. Gordon of the U.S. District Court previously accepted Kalshi’s argument that federally regulated event contracts fall exclusively under CFTC jurisdiction.
The confrontation with New York regulators adds to Kalshi’s mounting legal battles across the United States. As of Oct. 28, at least eight states including Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, Ohio, and New York have issued cease-and-desist or warning letters targeting the firm’s sports-event markets.
In Maryland, however, a judge ordered Kalshi to halt sports-event listings pending appeal, marking a setback for the company’s federal defense.
Legal experts note that the central issue lies in how event contracts are classified. If they are deemed “futures contracts,” they fall under federal commodities regulation; if treated as “wagering instruments,” they fall under state gambling law. The ongoing disputes illustrate the broader challenge of defining digital-era markets under decades-old legal frameworks.
A similar jurisdictional battle was seen with Crypto.com, which failed to obtain federal protections for its own sports-event markets in Nevada. The court found that the exchange’s offerings did not meet the statutory definition of swaps under the CEA leaving it open to state enforcement actions.
For Kalshi, success in federal court against New York regulators could set a major precedent, reinforcing CFTC authority over prediction markets nationwide.
Despite its mounting regulatory hurdles, Kalshi continues to draw significant investor confidence. Earlier this month, the company closed a $300 million funding round led by Andreessen Horowitz and Sequoia Capital, following a $185 million raise earlier this year backed by Paradigm, valuing the company at around $2 billion.
Sources close to the company told Bloomberg that Kalshi is now attracting new venture interest at valuations between $10 billion and $12 billion, despite its ongoing conflicts with New York regulators and other state agencies.
Analysts agree that the outcome of the New York regulators lawsuit could reshape how prediction markets and event-based contracts are governed in the U.S. If the federal court rules in Kalshi’s favor, the decision may clarify the CFTC’s supremacy over conflicting state gambling statutes.
Kalshi’s legal fight against New York regulators is more than a battle over jurisdiction as it’s a test case for the boundaries between state and federal control in emerging financial technologies. The case may determine whether digital event markets are treated as financial instruments or as gambling products under American law.
Should Kalshi win, it could solidify federal oversight for similar platforms, potentially opening doors for broader innovation within regulated prediction markets. However, if New York regulators prevail, the ruling could force the company to curtail its operations nationwide or limit offerings to states with explicit exemptions.
