Kalshi Takes Legal Fight on Event Contracts to New York

Trading platform Kalshi has sued the New York State Gaming Commission, accusing it of overstepping its jurisdiction by issuing a cease and desist order for allegedly illegally offering sports betting in the state.

Kalshi claimed in its complaint filed in a Manhattan federal court on Monday that the state regulator can’t oversee the platform as it’s a regulated exchange under the Commodity Futures Trading Commission.

It claimed that the New York regulator threatened “imminent civil penalties and fines” for offering sports event contracts. It requested the court for a preliminary and permanent injunction, along with a court declaration stating that the state can’t regulate it under the Constitution.

Event contracts on platforms such as Kalshi and its blockchain-based competitor Polymarket have become one of the hottest use cases for crypto this year, allowing users to wager on the outcome of events in areas including sports, politics and business.

The lawsuit is Kalshi’s latest legal salvo against regulators, as the platform has sued state gambling regulators in Nevada, New Jersey, Maryland and Ohio over similar circumstances and is defending itself against allegations by Massachusetts that it violated the state’s sports betting laws.

New York claims Kalshi is unlicensed

The New York State Gaming Commission said in a cease-and-desist letter sent on Friday that Kalshi was offering a platform for sports wagering in New York without a license.

It asked Kalshi 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 argued on Monday that the state regulator’s order “intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges.”

It claimed it was “subject to the CFTC’s exclusive jurisdiction,” and that New York’s “efforts to regulate Kalshi are both field-preempted and conflict-preempted.”

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The platform argued that New York’s actions “threaten immediate and irreparable harm” and shutting down its event contracts in the state “would threaten Kalshi’s viability and require devising complex technological solutions whose feasibility is entirely untested and unclear.”

Kalshi notches wins in court

Kalshi noted in its complaint that it had won preliminary injunctions in the Nevada and New Jersey federal courts, which it claimed had prevented “similar state overreach.”

A Nevada federal judge said in April that it was likely Kalshi would suffer harm if the court didn’t block the state’s gaming regulator, while a New Jersey federal judge came to a similar conclusion later that same month.

In August, a federal court in Maryland denied Kalshi’s request to block the state’s regulator.

Other event contract offering platforms, such as Robinhood Markets and Crypto.com, have also launched legal action against state regulators, claiming they were blocked from offering the products.

Earlier this month, a Nevada federal court denied Crypto.com’s request for an injunction.

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