Kalshi vs New York: who regulates sports-event markets?
KalshiEX LLC has taken New York to federal court, seeking to bar the state from applying sports‑betting laws to its sports‑event contracts.
In a complaint filed in the Southern District of New York, the CFTC‑designated exchange says its listed markets (e.g., who wins a tournament by a given date) are derivatives offered on a designated contract market (DCM) and therefore sit within the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act. New York’s Oct. 24 cease‑and‑desist letter warned Kalshi that it was offering unlicensed sports wagering and demanded it halt or face penalties; Kalshi responded by suing to enjoin enforcement.
By moving first in federal court, Kalshi narrows the dispute to preemption rather than the legality of the contracts under state gambling law. The complaint leans on CEA text, purpose, and history to argue Congress reserved exchange‑traded derivatives to the federal government. Kalshi also stresses process: its sports‑event contracts have been self‑certified under the CEA, and the statute gives the CFTC a 90‑day review path if it deems a contract “gaming.” Unless and until the CFTC acts, Kalshi argues, the products are authorized under federal law.
Kalshi has won preliminary injunctions in New Jersey and Nevada, where federal judges found a likelihood that state crackdowns were preempted and that the exchange would suffer irreparable harm. In Maryland, by contrast, a court denied similar relief, creating a live split. Several states have warned exchanges to stop offering sports‑event markets without local licenses, and more suits are expected as both sides test the line between CFTC authority and state gambling police powers.
New York is a high‑profile venue and a major market for retail finance. A Kalshi win would strengthen the preemption theory and encourage broader listing of sports‑event contracts on federally supervised venues. A loss would embolden states to require gaming licenses or geofencing, fragmenting market access. Either way, the immediate read‑through for platforms building in the U.S. is to plan for dual‑track compliance: federal exchange rules plus state‑level risk that may require targeted exclusions while litigation plays out.
Earlier GNcrypto covered Kalshi’s $300 million raise at a $5 billion valuation and its move to open access in 140+ countries, backed by Sequoia, a16z, Paradigm, CapitalG, and Coinbase Ventures. That global push – and a single shared liquidity poo – set the stage for today’s legal strategy: defend U.S. distribution via federal preemption while scaling internationally. We also noted Intercontinental Exchange’s plan to invest up to $2 billion in rival Polymarket and to distribute its event data, underscoring how mainstream market infrastructure is converging on prediction venues under different regulatory models.
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