Kalshi Sues New York State Gaming Commission After Cease-and-Desist Notice

• Kalshi levied a lawsuit against the New York State Gaming Commission over the weekend
• The lawsuit is in response to a cease-and-desist notice from the state
• The New York State Gaming Commission believes sports event contracts are tantamount to unlicensed sports betting

---

Kalshi is going on the offensive in the Empire State.

Kalshi filed a lawsuit against members of the New York State Gaming Commission just two days after the regulatory body sent a cease-and-desist letter to the prediction market company on Friday, Oct. 24.

“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,” Counsel for Kalshi wrote in the lawsuit.

Preemptive Action Taken in New York

Kalshi is preemptively taking legal action against New York after its gaming commission ordered the prediction market company to cease offering sports event contracts in the state. The lawsuit was filed in the U.S. District Court for the Southern District of New York over the weekend.

The company took a similar tact in Ohio, filing a lawsuit against the Ohio Casino Control Commission and Attorney General before the state could file a lawsuit against Kalshi after filing its own cease-and-desist notice.

Kalshi pointed to federal courts in both New Jersey and Nevada, which granted the company preliminary injunctions to prevent “similar state overreach.”

The courts, Kalshi noted, explained it is a “CFTC-designated DCM” and is subject to the Commodity Future Trading Commission’s exclusive jurisdiction.

“Even though Kalshi’s contracts are subject to the CFTC’s exclusive jurisdiction, defendants have implicitly threatened Kalshi with criminal action and explicitly threatened Kalshi with civil penalties, including fines, unless it shuts down these contracts in New York immediately. Defendants thrust seek to subject Kalshi to the patchwork of state regulation that Congress created the CFTC to prevent, and to interfere with the CFTC’s exclusive authority to regulatory derivatives trading on the exchanges it oversees,” counsel wrote.

Kalshi seeks an emergency temporary restraining order and preliminary injunction against the New York State Gaming Commission to avoid “immediate and irreparable harm that would result from Defendants’ unlawful acts.”

New York Threatens Civil Penalties and Fines

The New York State Gaming Commission provided Sports Betting Dime with the cease-and-desist notice sent to Kalshi on Friday, Oct. 24.

The notice demanded an immediate cease-and-desist from “illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platforming” in the state.

The gaming commission defined Kalshi’s sports event contracts and CFTC-filings as “sports wagering within the meaning of New York law,” which the company does not hold a license for in the state.

“The Commission reserves all rights to investigate further and to levy and collect civil penalties and fines in connection with Kalshi’s prior, current, and any future activity related to sports wagering and/or mobile sports wagering in New York.”

Who Regulates Sports Event Contracts?

Kalshi’s lawsuit against the New York State Gaming Commission revolves around the central question of who regulates sports event contracts, and prediction markets, in general.

Companies such as Robinhood and Kalshi believe that state regulatory bodies do not have the right to intrude on the government’s “exclusive” authority to regulate prediction market, filing lawsuits in New Jersey, Nevada, and Maryland to defend its practices. These companies believe the CFTC is the only regulatory body that can legally block contracts from being offered to customers.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.

The prediction market companies believe their offerings are not required to comply with state laws, as they have been preempted by the Commodity Exchange Act.