Trading platform Kalshi has filed a lawsuit against the New York State Gaming Commission, alleging that the commission exceeded its authority by issuing a cease and desist order. The order was issued because Kalshi was accused of illegally offering sports betting services within the state.
In its complaint, filed in a Manhattan federal court, Kalshi asserted that the state regulator lacks the jurisdiction to oversee the platform. The company stated that it is a regulated exchange operating under the purview of the Commodity Futures Trading Commission (CFTC).
Kalshi further claimed that the New York regulator had threatened "imminent civil penalties and fines" for its offering of sports event contracts. The platform is seeking both a preliminary and permanent injunction from the court. Additionally, it requested a court declaration that would affirm the state's inability to regulate Kalshi under the U.S. Constitution.
Event contracts, available on platforms like Kalshi and its blockchain-based counterpart Polymarket, have emerged as a significant use case for cryptocurrency this year. These contracts allow users to place wagers on the outcomes of various events, spanning categories such as sports, politics, and business.
This lawsuit represents Kalshi's most recent legal challenge against regulatory bodies. The platform has previously filed lawsuits against state gambling regulators in Nevada, New Jersey, Maryland, and Ohio under similar circumstances. Furthermore, Kalshi is currently defending itself against allegations from Massachusetts, which claims the platform violated the state's sports betting laws.
New York Claims Kalshi Operates Without a License
The New York State Gaming Commission issued a cease-and-desist letter on Friday, asserting that Kalshi was providing a platform for sports wagering in New York without possessing the necessary license.
The commission's letter instructed Kalshi to "cease and desist from 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."
Kalshi countered on Monday, arguing that the state regulator's order "intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges."
The platform contended that it is "subject to the CFTC’s exclusive jurisdiction," and that New York's "efforts to regulate Kalshi are both field-preempted and conflict-preempted."
Kalshi further argued that New York's actions "threaten immediate and irreparable harm." The platform stated that shutting down its event contracts in the state "would threaten Kalshi’s viability and require devising complex technological solutions whose feasibility is entirely untested and unclear."
Kalshi Secures Legal Victories in Previous Cases
In its complaint, Kalshi highlighted that it had previously obtained preliminary injunctions in federal courts in Nevada and New Jersey. The platform stated that these injunctions had successfully prevented "similar state overreach."
A federal judge in Nevada ruled in April that Kalshi was likely to suffer harm if the state's gaming regulator was not blocked. A federal judge in New Jersey reached a similar conclusion later that same month.
However, in August, a federal court in Maryland denied Kalshi's request to block the state's regulator.
Other platforms that offer event contracts, such as Robinhood Markets and Crypto.com, have also initiated legal actions against state regulators. These companies have claimed that they were prevented from offering such products.
Earlier this month, a federal court in Nevada denied Crypto.com's request for an injunction.