Event-contract platform Kalshi has taken legal action against New York regulators after the state moved to classify its sports event markets as illegal gambling. The company filed a federal lawsuit on October 27, seeking an injunction to block the New York State Gaming Commission from enforcing a cease-and-desist order that threatens both civil and criminal penalties.
According to Kalshi, the state’s order left it with “no other practical choice” but to defend its federally approved business and protect the interests of its users. The cease-and-desist letter, issued on October 24, accused the platform of running unlicensed sports wagering operations within New York.
Kalshi argues that New York’s actions pose “immediate and irreparable harm” to its business, users, and partners and that its markets fall squarely under the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), not state gambling laws.
Kalshi Seeks Federal Protection
By moving the case to federal court, Kalshi appears to be trying to avoid New York’s state courts, where the state constitution explicitly bans sports betting outside of licensed casinos.
Legal expert Daniel Wallach, founder of Wallach Legal LLC, suggested on X that Kalshi’s urgency to file federally stems from this strict state prohibition.
“Kalshi’s desperation to get this case filed in federal court ASAP likely stems from the fact that New York State has a constitutional-level prohibition against sports gambling except through state-licensed casinos,” Wallach wrote.
At the core of Kalshi’s argument is the Commodity Exchange Act (CEA), which grants the CFTC comprehensive authority over regulated futures exchanges. Kalshi claims that by treating its federally approved event contracts as gambling, New York is intruding into a domain preempted by federal law, creating confusion and undermining a legally sanctioned business model.
A Growing Legal Battle Across States
Kalshi’s case in New York mirrors similar legal fights it has faced in Maryland, Nevada, New Jersey, and Ohio states that have either issued cease-and-desist or warning letters over its sports event markets.
In Nevada, Judge Andrew P. Gordon previously sided with Kalshi, agreeing that federally regulated event contracts fall under CFTC oversight. However, a Maryland court ordered the company to halt its sports-event listings pending appeal, showing how outcomes vary by jurisdiction.
Crypto exchange Crypto.com also faced pushback in Nevada after attempting to defend its own sports event markets. Unlike Kalshi, the court ruled that Crypto.com’s contracts did not qualify as “swaps” under the CEA, leaving it exposed to state enforcement and requiring it to geofence Nevada by early November.
If successful, an injunction in New York would allow Kalshi to continue offering its sports markets from Manhattan, its home base, while the broader legal questions are resolved.
As of October 28, at least eight states Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, Ohio, and New York have issued formal notices or warnings to Kalshi over its sports event markets.
Investors Remain Bullish Despite Regulatory Pressure
Despite mounting legal challenges, Kalshi continues to attract strong backing from major venture capital firms.
Earlier this month, the company closed a $300 million funding round led by Andreessen Horowitz and Sequoia Capital, following a $185 million raise earlier this year supported by Paradigm.
Sources familiar with recent discussions say Kalshi’s valuation has surged to between $10 billion and $12 billion, signaling investor confidence in the platform’s long-term potential even as it navigates one of the most complex regulatory landscapes in U.S. fintech.
Bottom Line:
Kalshi’s lawsuit against New York could set a major precedent for how federally regulated event markets are treated under state gambling laws. The outcome may determine whether platforms like Kalshi can continue offering innovative financial prediction products nationwide or face an increasingly fragmented state-by-state regulatory battle.
