Kalshi Takes on New York Regulators in Federal Court
Kalshi has filed a lawsuit against New York regulators as the state seeks to classify its sports event contracts as unlicensed gambling and enforce a cease-and-desist order that threatens civil and criminal penalties.
Kalshi, a platform offering event contracts, has taken a significant step by filing a federal lawsuit against New York regulators. The company received a cease-and-desist letter from the New York State Gaming Commission, which accused Kalshi of operating illegal sports betting services without a state license. In response, Kalshi has sought an injunction to block enforcement, arguing that its markets fall under federal CFTC supervision and not state gambling law.
The lawsuit, filed on October 27, highlights the ongoing battle between Kalshi and state regulators. Despite facing legal pressure from several states, including Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, Ohio, and now New York, Kalshi has attracted interest from new investors, with valuations ranging from $10 billion to $12 billion. The company’s determination to protect its commercial interests and those of its users has led it to take a proactive approach in federal court.
Regulatory Challenges and Federal Oversight
At the heart of Kalshi’s claim is the argument that the Commodity Exchange Act, along with its 1974 amendments, gives the CFTC broad authority over regulated exchanges. The company believes that Congress intentionally eliminated any provision that would allow states like New York to intervene in the regulation of futures trading. By attempting to classify sporting event contracts as gambling and apply state gambling laws to a federally designated contract market, Kalshi says New York is entering a “field that Congress has pre-empted,” creating regulatory confusion while undermining its federally sanctioned business model.
Kalshi’s lawsuit seeks declaratory and injunctive relief against the New York State Gaming Commission, similar to what has been achieved in states such as Nevada and New Jersey. The company hopes to obtain a temporary protection from government enforcement, allowing it to continue offering its sports markets from Manhattan, where it is headquartered. With at least eight states having issued cease-and-desist or warning letters against Kalshi’s sports events markets, the company has filed lawsuits against several states, including Maryland, Nevada, New Jersey, and Ohio.
Investor Interest and Valuations
Despite the ongoing legal challenges, Kalshi has managed to attract significant investor interest. The company closed a $300 million funding round led by Andreessen Horowitz and Sequoia Capital, just months after raising $185 million in a deal backed by Paradigm at a valuation of $2 billion. Since then, Kalshi has attracted new investor interest, with valuations ranging from $10 billion to $12 billion, according to people familiar with the discussions.
The company’s ability to secure significant funding and attract prominent investors demonstrates its potential for growth and innovation in the event contracting space. As Kalshi continues to navigate the complex regulatory landscape, its commitment to protecting its users and commercial interests remains a top priority.
For more information on Kalshi’s lawsuit against New York regulators, visit https://crypto.news/kalshi-files-federal-lawsuit-against-new-york-regulators/
