Kalshi Sues New York Regulator, Alleging Overreach in Sports Betting Crackdown

Prediction market operator Kalshi has filed a lawsuit against the New York State Gaming Commission, accusing the regulator of exceeding its authority by ordering the platform to halt operations in the state.

The complaint, filed Monday in Manhattan federal court, argues that New York’s cease-and-desist order violates federal law by attempting to regulate a platform already under federal oversight. Kalshi contends it operates lawfully as a designated exchange supervised by the Commodity Futures Trading Commission (CFTC) — not as a betting platform falling within state jurisdiction.

According to court filings, the New York regulator warned Kalshi it faced “imminent civil penalties and fines” for offering event contracts tied to sports outcomes. Kalshi seeks both preliminary and permanent injunctions to block the order and a judicial declaration confirming that New York lacks authority over its federally regulated operations.

The New York State Gaming Commission maintains that Kalshi is facilitating unlicensed sports wagering. Its cease-and-desist letter directed the company to “cease and desist from illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platform in New York State in connection with any sports event.”

Kalshi counters that such demands “intrude upon the federal regulatory framework Congress established for derivatives on designated exchanges.” The company asserts that federal law preempts state action, making New York’s enforcement efforts unconstitutional.

Event Contracts Under Scrutiny

Platforms like Kalshi and blockchain rival Polymarket have popularized crypto-linked event contracts, allowing users to trade outcomes tied to politics, sports, and economic data. The market segment has exploded this year, prompting increased scrutiny from state gaming authorities.

Kalshi argues that restricting these markets would cause “immediate and irreparable harm,” forcing it to suspend core operations and develop “complex technological solutions” that may not be viable.

The New York lawsuit adds to a growing list of state-level conflicts. Kalshi has filed similar challenges against regulators in Nevada, New Jersey, Maryland, and Ohio, and continues to resist allegations in Massachusetts that it violated state sports betting laws.

In previous cases, Kalshi scored early victories: federal judges in Nevada and New Jersey issued injunctions blocking regulators from enforcing state restrictions. However, the company failed to secure similar relief in Maryland, where a court denied its injunction request in August.

Other prediction platforms, including Robinhood Markets and Crypto.com, have also launched lawsuits asserting that state gambling laws are being misapplied to federally supervised derivatives exchanges. Most recently, a Nevada judge rejected Crypto.com’s attempt to pause state enforcement.

Kalshi’s case against New York now tests a critical boundary: how far state governments can go in regulating event-based trading when federal law already governs derivatives markets. The outcome could define the next chapter of prediction markets in the United States.