The prediction market platform Kalshi has filed a lawsuit against the New York State Gaming Commission (NYSGC) after the regulator ordered the company to suspend its sports-related contracts. Kalshi argues that such products fall under CFTC-approved derivatives rather than gambling, and thus should not be subject to state-level restrictions.
According to the lawsuit, the NYSGC sent a cease-and-desist letter on October 24, 2025, warning that Kalshi’s event-based contracts could be treated as illegal sports bets. The regulator threatened administrative and even criminal penalties if the company did not halt these offerings in the state.
“The defendants have indirectly threatened Kalshi with criminal prosecution and explicitly indicated potential civil penalties, including fines, should the company fail to immediately suspend these contracts in New York,” the filing states.
Kalshi’s legal claim seeks a judicial injunction preventing any enforcement actions by the state authorities. The company maintains that its operations are federally regulated, having obtained official designation from the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM) — allowing it to list contracts on both political and sporting events across the U.S.
The firm argues that federal authorization supersedes local gambling restrictions, and that New York’s attempts to intervene could create regulatory fragmentation and uncertainty in the U.S. market. Kalshi also notes potential harm to its partners, including Robinhood, who help distribute and promote its products.
Earlier this year, Kalshi won a court battle with the CFTC, affirming its right to offer event-based contracts in the U.S. The platform has also partnered with the National Hockey League (NHL) — a move that allows it to use league branding in its markets, alongside another prediction platform, Polymarket.
The dispute underscores the ongoing tension between federal and state authorities over how to classify and regulate event-based trading — whether as financial derivatives or sports betting.
