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Kalshi is once again taking a stand — this time against one of the most powerful states in the U.S. The federally regulated prediction market has filed a lawsuit against New York, arguing that the state’s gaming regulators have no authority to penalize its operations.
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The conflict began when the New York State Gaming Commission sent a cease-and-desist order warning Kalshi to stop offering sports-based event contracts to residents of the Empire State. The regulator accused the company of running an unlicensed betting platform, despite its federal designation as a derivatives exchange under the CFTC.
In its court filing, Kalshi said New York’s actions violate federal law.
“This action challenges the State of New York’s intrusion into the federal government’s exclusive authority to regulate derivatives trading on exchanges overseen by the Commodity Futures Trading Commission,” the lawsuit states.
The company further argued, “New York’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges. The state’s efforts to regulate Kalshi are both field-preempted and conflict-preempted.”
Kalshi asked the court to grant both preliminary and permanent injunctions that would block the state from enforcing its cease-and-desist order and protect the company from fines or civil penalties.
New York officials view things differently. The state’s cease-and-desist letter accuses Kalshi of “illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platform.”
According to the commission, Kalshi’s event contracts — including those tied to outcomes in the NFL, NBA, MLB, and NCAA — fit the legal definition of betting. The regulator said that such contracts involve “staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.”
The letter also listed several examples of sports markets Kalshi offers, including future outcomes and game-related predictions that the state considers to fall under gambling law.
Kalshi maintains that its operations are fully legal under the Commodity Exchange Act and subject only to CFTC oversight. The company insists that its “event contracts” are federally approved derivatives products, not sports bets.
It also highlighted that similar lawsuits in Nevada and New Jersey resulted in favorable rulings:
“Earlier this year, federal courts in Nevada and New Jersey granted Kalshi preliminary injunctions to prevent similar state overreach. These courts enjoined state officials from attempting to prohibit Kalshi’s event contracts, explaining that because Kalshi is a CFTC-designated DCM, it is subject to the CFTC’s exclusive jurisdiction and state law is field preempted.”
Still, the battle continues. Nevada has since filed a motion to dismiss Kalshi’s injunction, with a hearing scheduled for November 14.
Kalshi’s legal fight could shape how prediction markets operate across the U.S., especially as states like New York — home to the largest sports betting handle in the nation — push back against federally regulated event-trading platforms.
New York’s regulated sportsbooks recorded a $2.29 billion handle in September alone, and regulators appear determined to protect the boundaries of their jurisdiction. But Kalshi argues that such state actions interfere with federal law and threaten innovation in event-based trading.
For now, the dispute between Albany and Washington regulators remains a high-stakes tug-of-war — one that could redefine the future of prediction markets nationwide.
Kalshi claims that only the CFTC, not state gaming agencies, can regulate its platform because it operates as a federally designated contract market.
The state contends Kalshi’s event contracts amount to unlicensed sports betting and therefore violate New York Racing and Gaming Law.
Yes. The company has filed lawsuits against regulators in Nevada and New Jersey and secured temporary injunctions in both cases.
The platform awaits a ruling in its New York case, while the Nevada court will hold a hearing on its motion to dismiss in mid-November.