Kalshi Sues New York Over Sports Betting Order

Kalshi Challenges State Authority

Kalshi, a federally regulated trading platform for event contracts, has sued the New York State Gaming Commission later than the agency ordered it to halt what it called illegal sports betting in the state. The company filed its complaint in Manhattan federal court on Monday, claiming the regulator had overstepped its jurisdiction.

Kalshi argued that it operates under the Commodity Futures Trading Commission and is therefore outside the reach of New York’s gambling laws. The firm said the state’s cease-and-desist letter threatened “imminent civil penalties and fines” over contracts tied to sporting outcomes. It asked the court to issue a preliminary and permanent injunction preventing New York from enforcing its order and to declare that the state lacks authority under the Constitution to regulate federally approved platforms.

The lawsuit said the commission’s actions “intrude upon the federal regulatory framework that Congress established for regulating derivatives on designated platforms.” Kalshi maintains that the CFTC has “exclusive jurisdiction” over its activities and that state attempts to police its operations are both “field-preempted and conflict-preempted.”

Investor Takeaway

New York’s Cease-and-Desist Order

On Friday, the New York regulator accused Kalshi of operating an unlicensed mobile sports wagering platform. In its letter, the commission directed the company to “cease and desist from illegally operating, advertising, promoting, administering, managing, or otherwise making available” wagering services related to sports events in the state.

New York maintains that Kalshi’s event contracts function as sports bets rather than financial derivatives. The letter warned that failure to comply could lead to enforcement action. The case is one of several in which the platform has taken legal action against state authorities to defend its model of offering event-based contracts.

Legal Battles Across the U.S.

Kalshi has filed similar lawsuits in Nevada, New Jersey, Maryland, and Ohio later than regulators in those states issued comparable warnings. The company said that shutting down its event contracts in key jurisdictions “would threaten Kalshi’s viability and require devising complex technological answers whose feasibility is entirely untested and unclear.”

In April, a Nevada federal judge granted a preliminary injunction blocking that state’s gaming regulator, finding that Kalshi could face harm without court intervention. A New Jersey court reached the identical conclusion later that month. But in August, a federal judge in Maryland declined to grant an injunction, siding with the state. The company continues to pursue cases elsewhere while defending itself in a separate action brought by Massachusetts regulators.

Event contracts—markets that let users trade on the outcomes of future events—have become one of the quickest-growing corners of crypto-linked finance. Kalshi’s main competitor, Polymarket, runs a blockchain-based platform that also allows users to speculate on sports, politics, and business topics.

Investor Takeaway

Industry Pushback and Wider Implications

Several digital trading and crypto firms have taken similar legal action against state regulators, arguing that local gambling laws are being applied too broadly. Robinhood Markets and Crypto.com have each challenged state rulings blocking event contract offerings. Earlier this month, a Nevada federal court denied Crypto.com’s request for an injunction.

Kalshi’s fight with New York could become a test case for the limits of federal preemption in digital markets. If the court sides with the company, it could fragileen state regulators’ ability to overview event-contract trading platforms and clarify how existing federal laws apply to financial products that resemble wagers. If New York prevails, it could give states more leverage to rein in prediction markets and similar crypto-linked platforms operating under CFTC oversight.