Kalshi finds itself in a bind in New York with the Empire State attorney general, Letitia James, filing a lawsuit against the prediction market platform after the platform failed to obtain the necessary, according to the AG’s office, permit from the New York State Gaming Commission to operate legally in the state.
Kalshi Once Again Targeted in New York
The argument runs on the familiar lines. Kalshi argues that it is not offering gambling, whereas the AG’s office is arguing the toss. AG James is part of a trend across the United States whereby attorneys general have been assaulting the vertical and openly bringing companies to court, having also filed similar petitions in April against two other prediction market operators, Coinbase Financial Markets and Gemini Titan.
The CFTC, meanwhile, has already taken issue with similar attempts to regulate prediction market platforms on a per-state basis, and is now pursuing its own emergency motion against New York’s enforcement activity, filed less than an hour before James’s lawsuit landed.
The AG’s office argues against event contracts more broadly, covering sports, elections and other events, and specifically flags that they are too like sports betting to be ignored, critics say. Among the issues brought up is the fact that event contracts on sports can be accessed at the age of 18 instead of the age of 21 which is the standard for sports betting.
A statement by the AG’s office further outlined the motivation behind the move, and said:
“New York’s gambling laws protect children from underage betting and help combat gambling addiction. No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
CFTC Comes to the Rescue, MOre Work Yet to Be Done
The CFTC has already stepped in as well. On Wednesday, a federal appeals court in Manhattan denied Kalshi’s request to avoid being subject to New York’s gambling laws while it appeals a July 8 refusal by US District Judge Analisa Torres to block the state’s enforcement. That refusal came after Torres found the state’s interests in preventing gambling addiction, preserving the integrity of sports and avoiding a proliferation of unregulated contracts outweighed Kalshi’s own interests.
Kalshi insists that states cannot simply shut down a federally licensed exchange, and it isn’t alone in facing this fight: at least four states, Massachusetts, Michigan, Nevada and Washington, have already won court orders restricting its activities, while the CFTC has challenged state-level regulation in at least nine states including New York.
New York’s lawsuit seeks a halt to Kalshi’s alleged unlawful conduct, forfeiture of its gains, triple damages in civil fines, and restitution to customers.