Kalshi has filed a lawsuit against the New York State Gaming Commission, asserting that the commission is overstepping its bounds by delivering a cease and desist order. This order claims that Kalshi is unlawfully providing sports betting services within the state.
In its complaint lodged in a Manhattan federal court on Monday, Kalshi contends that the state regulator lacks authority over the platform, as it operates as a regulated exchange under the Commodity Futures Trading Commission (CFTC).
Kalshi alleges that the New York Gaming Commission threatened “imminent civil penalties and fines” due to its sports event contracts and seeks both a preliminary and a permanent injunction, as well as a court declaration stating that the state cannot regulate it according to the Constitution.
Event contracts on exchanges like Kalshi and its blockchain-fiend, Polymarket, have gained significant traction this year, enabling users to bet on outcomes related to sports, political events, and more.
This lawsuit marks another step in Kalshi’s confrontational approach towards regulators, as it has previously filed lawsuits against gaming regulators in Nevada, New Jersey, Maryland, and Ohio under similar claims and is currently countering allegations in Massachusetts for purported violations of state sports betting laws.
The New York State Gaming Commission’s Stand
The New York regulator claimed in a cease-and-desist letter sent on Friday that Kalshi is offering a platform for sports wagering in the state without a proper license. In the letter, it demanded that Kalshi halt all illegal operations related to sports betting within New York state.
Kalshi asserted that this order encroaches on the federal regulatory framework established by Congress for managing derivatives on designated exchanges, claiming the CFTC’s exclusive jurisdiction over its operations. It accused the state of both field preemption and conflict preemption.
Kalshi argued that New York’s directives “pose an immediate and irreparable threat,” potentially jeopardizing the platform’s existence and necessitating complicated technological adjustments that remain untested.
Legal Victories for Kalshi
In its filing, Kalshi noted it had successfully acquired preliminary injunctions in both Nevada and New Jersey courts, preventing what it describes as similar state overreach. Earlier, a federal judge in Nevada indicated that Kalshi was likely to experience harm if the state’s regulator was not restrained from acting, with a similar ruling in New Jersey corroborating this position. In contrast, a Maryland court denied Kalshi a request for an injunction.
Additionally, other platforms offering event contracts like Robinhood Markets and Crypto.com have also taken legal action against state regulators, claiming they have been obstructed from providing these products. A Nevada federal judge recently denied Crypto.com’s injunction request as well.
Source: Daniel Wallach
