Kalshi Fights New York’s Effort to Shut Down Sports Event Contracts

TLDR

• Kalshi has filed a lawsuit against New York to prevent the state from shutting down its sports prediction markets.
• The lawsuit challenges New York’s attempt to regulate Kalshi’s sports contracts, claiming federal law grants exclusive jurisdiction to the CFTC.
• Kalshi argues that state regulations violate the Supremacy Clause of the U.S. Constitution and would create operational challenges.
• New York regulators issued a cease-and-desist letter, claiming Kalshi’s event contracts violate state gambling laws.
• Kalshi warns that blocking its platform in New York could lead to significant business and reputational harm.

Kalshi, a federally regulated derivatives exchange, filed a lawsuit against New York’s attempt to shut down its sports prediction markets. The lawsuit, filed in the Southern District of New York, challenges the state’s enforcement actions. Kalshi argues that New York’s actions violate federal law on derivatives trading.

Kalshi’s Legal Battle Over New York’s Sports Prediction Ban

Kalshi filed the complaint, KalshiEX LLC v. Robert Williams, to stop the New York State Gaming Commission from imposing fines. The state regulators claim that Kalshi’s sports-related contracts violate New York gambling laws. Kalshi’s complaint seeks to prevent any civil penalties for continuing operations within the state.

Kalshi received a cease-and-desist letter from state regulators on October 24, 2025. The letter demanded the platform stop offering sports-related event contracts in New York. Kalshi argues that the state lacks authority to regulate these types of contracts, as they are federally overseen.

The Commodity Futures Trading Commission (CFTC) regulates Kalshi as a designated contract market. The CFTC granted Kalshi this designation after a thorough review in 2020. Kalshi insists that only the CFTC has jurisdiction over the contracts it offers.

Kalshi offers event contracts on sports outcomes, such as NCAA tournament advancements and the U.S. Open Golf Championship. The Commodity Exchange Act governs the exchange’s contracts. This law preempts state regulations to avoid conflicting laws across different jurisdictions.

New York Threatens Kalshi Over Sports Contracts

New York regulators argue that Kalshi’s event contracts fall under state gambling laws. They claim these contracts represent illegal sports wagering under the state’s Penal Law and Racing Law. The New York State Gaming Commission threatened criminal and civil penalties unless Kalshi ceases operations in the state.

Kalshi maintains that its contracts are legal under federal law. The exchange points out that the Commodity Exchange Act overrides state regulations in this area. According to Kalshi, the state’s interference violates the Supremacy Clause of the U.S. Constitution.

Kalshi warns that if forced to block access by state, it would harm its business. The CFTC requires Kalshi to operate as a national exchange accessible to all participants. State-by-state restrictions could create significant operational challenges for the platform.

The legal battle between Kalshi and New York highlights diverging regulatory philosophies. This is similar to other recent efforts by states to regulate emerging financial technologies like cryptocurrency. Kalshi’s lawsuit raises questions about the future of prediction markets across the country.

Kalshi argues that its federally authorized event contracts should be accessible nationwide. The exchange claims blocking access for New York residents would undermine its regulatory standing. Kalshi also faces reputational harm and uncertainty for consumers and business partners if it must comply with state-level restrictions.

New York’s stance on Kalshi follows broader state-level actions against financial technologies. The state has previously taken a tough approach to other markets, including cryptocurrency.

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