Trading prediction platform Kalshi has filed a lawsuit against the New York State Gaming Commission (NYGC), alleging that the regulator overstepped its authority when it issued a cease-and-desist order accusing the company of operating an illegal sports betting platform. The legal filing came on Monday, October 27, just days after the NYGC sent its formal order on Friday, October 24, demanding Kalshi stop offering unlicensed sports-related contracts to users in New York.
JUST IN: Kalshi has filed an emergency motion for a temporary restraining order and preliminary injunction against the New York State Gaming Commission and asked for an immediate hearing. The case has been assigned to Judge Analisa Torres, who was appointed by Barack Obama. pic.twitter.com/t5bc3k44bE
— Daniel Wallach (@WALLACHLEGAL) October 27, 2025
Kalshi argues federal oversight supersedes state gaming laws
In the complaint filed in Manhattan federal court, Kalshi seeks both a temporary restraining order and a preliminary injunction to prevent New York regulators from enforcing penalties against the company. Kalshi claims that as a Commodity Futures Trading Commission (CFTC)-regulated exchange, it is exempt from state-level gambling laws.
“This action challenges the State of New York’s intrusion into the federal government’s exclusive authority to regulate derivatives trading on exchanges overseen by the Commodity Futures Trading Commission,” Kalshi wrote in the court documents.
The company asserts that New York’s efforts violate the federal preemption principle, arguing that state law cannot override federally regulated derivatives markets.
Kalshi is requesting both preliminary and permanent injunctions, as well as a declaratory judgment confirming that the state cannot regulate its activities under the Constitution.
The New York regulator’s position
The New York State Gaming Commission cited its powers under Racing Law in the cease-and-desist letter, which demanded that Kalshi shut down what it described as an unlicensed sports wagering operation. The letter accused the company of “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.”
According to the NYGC, Kalshi’s event contracts, which allow users to trade based on the outcomes of sports events such as NFL, NBA, MLB, and NCAA games, constitute unlicensed sports wagering. Regulators classified those offerings as “staking or risking something of value upon the outcome of a contest of chance or a contingent event,” placing them within state gambling restrictions.
New York is the most profitable state-regulated sports betting market in the country, reporting a $2.29 billion handle in September alone from eight licensed online sportsbook operators. Kalshi’s offering, according to the commission, competes directly in this regulated industry without a state license.
Familiar legal tactics across multiple states
Kalshi’s lawsuit against New York follows a familiar strategy the company has used in Nevada, New Jersey, Maryland, and Ohio, where it has similarly claimed state overreach into federally governed territory.
In earlier cases, federal judges in Nevada and New Jersey granted Kalshi temporary injunctions, agreeing that the company faced potential “immediate and irreparable harm” if state regulators continued enforcement. However, in Maryland, Judge Adam Abelson denied Kalshi’s request, concluding that Congress did not intend for the Commodity Exchange Act (CEA) to completely preclude state-level gaming laws. That ruling remains influential, with an appeal still pending.
Kalshi faces further scrutiny in Massachusetts and California, where state authorities and tribal entities have filed related legal challenges. In Massachusetts, Attorney General Andrea Joy Campbell is arguing that Kalshi must obtain a sports betting license to operate legally.
Wider implications for prediction markets
The Kalshi case represents part of a broader struggle between emerging prediction market technologies and state-level gaming frameworks. Event contract platforms such as Polymarket, Crypto.com, and Robinhood Markets have all faced similar regulatory pressures when attempting to offer markets tied to real-world events, including sports, politics, and economics.
Earlier in the month, Crypto.com suffered a legal setback in Nevada when a federal judge declined to grant its request for an injunction to prevent enforcement by the state’s gaming regulator. The decision forced the company to delist its sports event contracts in Nevada effective November 3, marking the first meaningful retreat for prediction markets in the U.S. this year.
What comes next in New York
Kalshi now hopes to replicate its earlier court successes in Nevada and New Jersey by securing a temporary injunction against New York regulators. The company argues that the cease-and-desist order creates “imminent civil penalties and fines”, threatening its business operations and requiring rapid, untested technical changes to shut down markets in the state.
Legal observers note that the outcome of the New York case could significantly shape how event-based trading platforms are treated under both federal and state law. A ruling in Kalshi’s favor could reaffirm federal preemption and clear a path for broader prediction market adoption across the U.S. Conversely, if New York prevails, it could reinforce the authority of state gaming commissions to regulate or prohibit these platforms within their borders.
For now, the legal battle underscores an escalating clash between federally regulated exchanges and state regulators seeking to maintain control over expanding digital wagering markets.
Oleksii Shumak
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