Gov. Kathy Hochul and state Attorney Letitia James are counting their winnings Wednesday after a federal judge handed them a victory over the prediction market company Kalshi, saying it’s offering unlicensed sports gambling.

Kalshi is pushing back, but some experts say the ruling could have a chilling effect on this kind of prediction market that’s largely been unregulated under the Trump administration. 

What You Need To Know

Gov. Kathy Hochul and state Attorney Letitia James are counting their winnings Wednesday after a federal judge handed them a victory over the prediction market company Kalshi, saying it’s offering unlicensed sports gambling 

Kalshi is pushing back, but some experts say the ruling could have a chilling effect on this kind of prediction market that’s largely been unregulated under the Trump administration

The company allows people to bet on almost everything, from the outcome of sporting events to political contests

Late Tuesday, Manhattan federal judge Analisa Torres denied claims laid out in a lawsuit by the prediction market company, whose lawyers argued it is not a sports betting company and should not be subject to state gaming regulations.

They argued that the company offers “event contracts” so its operations should instead fall under the federal Commodity Futures Trading Commission.

The judge disagreed. 

“Congress has long recognized that the states have the primary responsibility for determining what forms of gambling shall be legal within state borders and the United States Supreme Court in Murphy versus NCAA found that when Congress does not directly regulate sports gambling, the states are free to act on their own, and Judge Torres’ decision is consistent with federal preemption principles,” Daniel Wallach, a sports betting and gaming attorney, said.

The prediction market platform allows people to bet on almost everything, from the outcome of sporting events to political contests.

Catching the attention of state regulators: last fall the state Gaming Commission sent a cease and desist letter arguing Kalshi was engaging in illegal gambling. 

Kalshi sued. 

“This controversy has been playing out across the country. New York happens to be one of about 30 or 40 lawsuits pending across the United States,” Wallach said.

In a joint statement, Hochul and James took a victory lap, saying: “New York’s gambling laws are designed to protect consumers. Kalshi tried to ignore them. Yesterday, they lost in court.”

“We will continue to hold all gambling platforms accountable to the law — and that includes prediction markets,” they continued.

“We respectfully disagree with the Court’s decision and are considering all legal options,” said a Kalshi spokesperson. 

The Commodity Futures Trading Commission is also suing the Empire State over its ability to regulate these markets. 

A spokesperson did not return a request for comment. 

“It’s a little bit odd for me to see a Republican regime trying to take oversight of a class of businesses that have historically been regulated on the state level, given the longstanding Republican position, at least pre-Trump, of state rights,” Marc Edelman, a law professor at Baruch College, said.

“If you were to look at minimum wage, the United States maintains a federal minimum wage. Some states, however, choose to adopt the minimum wage that is higher than the federal standards, and will enforce it,” he added.

So, what’s next for Kalshi?

One sports betting attorney says the company can try to buy one of nine sports betting licenses.

“Their options are to either win in the courts, to win in the Second Circuit, win at the Supreme Court, get Congress to change the law, or failing that, go out and get a New York-issued license,” Wallach said.

Chair of the State Senate Committee on Racing, Gaming and Wagering, Joseph Addabbo, who is a Queens Democrat, says regulation should be a legislative priority.

“They don’t mind paying a tax rate to New York, but again, we need New York to say, ‘OK, here are the regulations,’” he told NY1. 

“There’s no guardrails, there’s no protocols. People with an addiction may have an issue, and we can’t address that,” Addabbo added.