Photo by Marija Zaric on Unsplash
Kalshi has filed a lawsuit in New York in response to the state’s cease-and-desist letter to the company. The New York State Gaming Commission sent the order on Friday, and Kalshi responded by filing its counter-lawsuit on Monday.
New York became the eighth state to send a cease-and-desist letter to Kalshi, marking the first such action since May. The company has responded by filing lawsuits in four states: Nevada, New Jersey, Maryland, and Ohio. It filed its lawsuit in Ohio earlier this month.
New York’s order comes as Kalshi expands its presence in sports with the start of the NFL and NBA seasons. The letter shared with CasinoBeats states, “The Commission demands that Kalshi cease and desist immediately from illegally operating, advertising, promoting, administering, managing, or otherwise making available sports wagering and/or a mobile sports wagering platform in New York.”
When asked for further details on why the letter was sent at this time, a spokesperson said, “The letter speaks for itself. We have no further comment on the matter.”
Kalshi swiftly filed a counter-lawsuit, stating, “Because its platform listed contracts that were be (sic) traded over the weekend, Kalshi has no other practical choice to protect its commercial interests and those of its users except to bring this suit.”
A Kalshi spokesperson told CasinoBeats, “The threatened actions from the New York Gaming Commission seek to undermine not just Kalshi’s contracts, but the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities markets for decades.
“Prediction markets are a critical innovation of the 21st century, and like all innovations, they are initially misunderstood. We are proud to be the company that has pioneered this technology and stand ready to defend it in a court of law.”
Same Arguments Rehashed
In its letter, the Gaming Commission warned that it “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.”
Kalshi’s lawsuit argues this threat forces it to “seek judicial relief.” The company makes the same argument as its previous filings in other states, that it is federally regulated by the Commodity Futures Trading Commission (CFTC). States, therefore, do not hold authority over their operations and cannot dictate which markets are permitted.
The lawsuit states, “Defendants may not enforce New York’s gambling laws against Kalshi because Kalshi is a federally regulated exchange that operates under the exclusive oversight of the CFTC.”
This argument had initial success. In Nevada and New Jersey, judges granted preliminary injunctions to allow Kalshi to continue operating. However, recent rulings have not been as favorable. In Maryland, a judge rejected the same request, but Kalshi has filed an appeal and is allowed to continue operating while that appeal is pending.
Crypto.com Withdraws From Nevada, Kalshi Not Backing Down
In Nevada, the same judge who granted Kalshi’s injunction also refused to do the same for Crypto.com. Kalshi’s rival announced it would withdraw from the state. Kalshi, however, seems to have no intention of stepping back from any jurisdiction.
The company frequently advertises that it offers legal sports betting in all 50 states and recently announced plans to expand globally. CEO Tarek Mansour posted on X that the platform will be available in more than 140 countries around the world.
Another argument against state regulation that the company makes is that geo-blocking users is costly and challenging to implement. However, if the platform expands internationally, it will almost certainly have to geoblock some countries. That leaves the possibility of also restricting users in some US states.
Given the size of New York’s sports betting handle, it would not wish to start by blocking users in the state where it also has its headquarters. New Yorkers wagered almost $24 billion on sports last year, which continues to rise this year. Last month, bettors staked $2.29 billion, 10% more than in September 2024.
New York Mayor References Kalshi on Stage
While the Empire State’s gambling regulator is taking action against Kalshi, New York City’s future mayor was referencing the prediction market operator on stage.
Kalshi’s market on the next mayor gives Zohran Mamdani a 92% chance of winning over incumbent Andrew Cuomo. In a campaign speech, Mamdani used this as a sign of his popularity, and Kalshi was quick to post the video on X.
It is a sign that many have accepted prediction markets as the norm when trading on election markets was prohibited previously. The deal Kalshi made with the NHL further indicates that its sports markets are becoming mainstream. If New York’s courts rule against the company, that may change.