New York Slaps Kalshi With Cease-and-Desist Order

The latest legal drama is unfolding against the prediction futures market platform, Kalshi, and this time it originates from the heaviest hitter in the online sports betting market, New York.

Stop Spreading the Ruse

New York-based Kalshi, a financial exchange and prediction market operating throughout the United States, has been the target of several cease-and-desist orders that have turned litigious after Kalshi refused to honor them.

State gaming regulators and the sportsbooks they govern are aggrieved because Kalshi has been muscling in on the sports betting market using event contracts that are traded, similar to the bets that mobile sportsbooks accept.

But Kalshi has successfully argued that they are governed by the Commodity Futures Trading Commission (CFTC), whose federal authority supersedes that of state regulatory agencies.

Therefore, Kalshi and competitors like Polymarket have operated unfettered in all 50 states, even in markets like California and Texas that have not currently legalized sports betting but are considered the industry’s holy grail due to their dense populations.

Although Kalshi has scored several legal victories, a recent setback in a Maryland state court has muddied the constitutional waters, and the CFTC has refused to enter the fray. Therefore, the future of these trading platforms operating in the sports betting realm, which historically took contracts on commodities like gold, silver, and orange juice futures, is far from settled.

State regulators are imploring these futures trading platforms to stop spreading the ruse that they are legally authorized to offer sports event contracts in the Empire State and, thus, have recently announced a cease-and-desist letter to the firm.

Kalshi Countersues

The cease-and-desist letter sent to Kalshi by the New York Gaming Commission has triggered a countersuit by Kalshi, claiming yet again that they are regulated at the federal level, which they claim overrides any state ordinances.

The blueprint is familiar, and as long as the federal courts are granting Kalshi and its competitors the authority to circumvent state regulations, Kalshi will continue the same legal strategy.

However, the New York Gaming Commission (NYGC) contends that they are violating the law by offering contracts based on the outcomes of sports events without a license.

The NYGC stated that Kalshi’s sports events contracts permit individuals the opportunity of “staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome with respect to a sports event.”

Bookmakers Review will continue to monitor this story and report back as events unfold.