Kalshi Sues New York Over Sports Prediction Market Regulation

KalshiEX, provider of the Kalshi events contracts platform, has filed a complaint against the New York State Gaming Commission in the US District Court for the Southern District of New York. As in the other cases previously filed, the company argues that federal law preempts the state's authority to regulate its sports-event trading contracts. 

The filling company, which is a subsidiary of Kalshi Inc., operates a federally designated derivatives exchange under the oversight of the US Commodity Futures Trading Commission (CFTC). It claims that its prediction market products, such as contracts on sporting outcomes, fall solely under federal jurisdiction through the Commodity Exchange Act (CEA).

In its complaint, Kalshi asked the court to bar New York from taking any enforcement action against its sports-related products. The company said the state's recent cease-and-desist order, issued Oct. 24, unlawfully interfered with its federally authorized exchange. 

New York regulators accused Kalshi of illegally offering unlicensed New York sports betting, citing examples such as "Will [a player] win the golf grand slam before [a certain date]?"

Kalshi maintains that its contracts were self-certified under the CEA and remain valid until the CFTC reviews them. The exchange also referenced past federal rulings in Nevada and New Jersey that favored its position, while Maryland courts denied similar relief. 

The dispute is part of a broader conflict between federal commodities regulators and state gaming agencies over whether event-based trading at the best prediction markets constitutes gambling or regulated financial activity.

Crypto.com suspends sports-event contracts in Nevada

The legal battle over sports prediction markets spread to Nevada, where the state's Gaming Control Board said that Crypto.com must stop offering all sports-event contracts for residents starting on Nov. 3. The decision came after US District Judge Andrew P. Gordon turned down the company's request to stop state gaming laws from being enforced against its operations. Crypto.com said it plans to appeal the decision. 

Brittnie Dreitzer, Chair of the Nevada Gaming Control Board, said the agency is dedicated to keeping Nevada's gaming industry honest and stable. She confirmed that Crypto.com will not allow residents to open or maintain positions in any sports-event contracts while the case is ongoing.

Dreitzer reiterated that under state law, such contracts qualify as wagering activity regardless of whether they are traded on CFTC-regulated exchanges. The restriction applies to bets or contracts linked to sporting events, esports, entertainment awards, and political contests.

The Board emphasized that only operators with a nonrestricted gaming license and approved sportsbook systems may legally offer such products in Nevada. The enforcement makes it clear that state regulators believe they have the right to regulate prediction markets that involve sports outcomes, even if federal commodity trading rules say otherwise.