Kalshi Goes After New York Gambling Regulator

Prediction market platform Kalshi is not intimidated by gambling regulators, nor attorney generals. The company has been fighting and winning a case in New Jersey and is possibly gearing up for a fight in Massachusetts and Arkansas, where the Attorney Generals have issued a public opinion that these platforms are indeed in violation of local gambling laws.

Prediction Markets on the Offensive Against Gambling Regulators

Now, though, the firm is launching a federal lawsuit against the New York Gambling Commission, seeking to limit the regulator’s powers and effectively prohibit it from equating Kalshi to a sports betting platform.

Kalshi has insisted that its product remains, as it always has been, an event contract that is subject to regulation by the Commodity Futures Trading Commission, whose authority supersedes that of local gambling regulators.

However, not all fights have gone well, with Crypto.com losing a similar challenge in Nevada and showing the first cracks in prediction markets’ push against regulators and courts. Commenting for Decrypt, Daniel Wallach, founder and principal of Wallach Legal LLC, said:

“In five out of six cases, Kalshi took the initiative and sued first because most states require advance notice before filing lawsuits against businesses that engage in repeated and persistent violations of state law.”

This, argues Wallach, is an attempt to frame the debate differently and focus on whether federal law overrules state laws, including in matters such as gambling. To Kalshi, it doesn’t matter if its event contracts are “legal gambling,” although the company has repeatedly and tirelessly insisted that this is not it.

Framing the Debate Narrowly to Avoid Confusing the Legal Argument

If anything, Kalshi offers a “superior product’ to any sports betting platform out there. The idea is, Wallach argues, to argue whether the contracts are legal per se, but not who has jurisdiction over them – an important distinction, he believes.

But Kalshi, too, has not been winning everywhere. An attempt to stay the Maryland regulator has failed, while the company has won against preliminary injunctions in Nevada (the same place Crypto.com lost) and New Jersey. Of course, this is not the full story.

“Kalshi has been able to effectively persuade two courts preliminarily that the broad definition of a swap, coupled with the exclusive jurisdiction language, gives the CFTC exclusive regulatory authority over any contract traded on CFTC-designated exchanges,” Wallach explained for the publication.

At the same time, more states are likely to open cases against Kalshi and fellow companies Robinhood and Crypto.com. Arizona and b are the most likely next frontier for legal action, but more are to follow, especially as Arkansas also appears gung-ho on the sector, not least owing to a complete ban on gambling.