News: Kalshi Sues New York After Receiving Cease-And-Desist Letter
Roundup: CFTC has a new nominee for chairman; The Atlantic digs into the legality of sports betting via prediction markets in 50 states.
Kalshi has another new front in its legal battle to offer sports betting nationwide.
The prediction market sued New York officials early Monday morning to stop enforcement of a cease-and-desist letter for allegedly offering sports betting without a license in the state.
The complaint dated Oct. 27 says:
“The New York State Gaming Commission seeks to prevent Plaintiff KalshiEX LLC (‘Kalshi’) from offering event contracts for trading on its federally regulated exchange. It does so by threatening Kalshi with imminent civil penalties and fines for offering these contracts.”
H/T attorney Andrew Kim for spotting the lawsuit.
The case relies on themes of federal preemption of state law that we have seen in similar cases around the country. Kalshi argues that its sports event contracts are legal under federal law under the oversight of the Commodity Futures Trading Commission.
Sports prediction markets face a new wave of fraud, from insider trading to syndicates and spoofed locations. Radar Protect helps platforms detect and stop risky activity in real time, using location and device signals across 300+ brands in finance, retail, QSR, and gaming. Flag multi-accounting, account sharing, identity theft, and more, without slowing down your user experience. Radar can help you fight fraud with less friction.
The lawsuit came about because of actions on Friday by New York gaming regulators, according to Kalshi’s filing:
On October 24, 2025, the New York State Gaming Commission (the “Gaming Commission”) sent Kalshi a cease-and-desist letter claiming that offering event contracts based on sporting events “within New York State” without a sports gaming license violated New York law. The letter directed Kalshi to “cease and desist immediately from illegally advertising, promoting, administering, managing, or otherwise making available sports wagering and/or a mobile sports wagering platform in New York.”
The Gaming Commission warned that offering sports gaming in New York “in connection with any sports event” under its Racing Laws empowers it to “levy and collect civil penalties and fines for any violation of the Racing Law.” Listing 20 of Kalshi’s federally self-certified event contracts as unlawful, the Gaming Commission demanded Kalshi cease and desist operations and without providing a compliance date.
The Gaming Commission added that the activity described on Kalshi’s website is “offering sports wagering gambling opportunities to Kalshi customers within the meaning of Penal Law § 225.00(2)” because the customer “is 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 within the meaning of Racing Law section 1367(1)(t).” … Consequently, the Gaming Commission claimed that it had the power to “investigate further and to levy and collect civil penalties and fines in connection with Kalshi’s prior, current, and any future activity related to sports wagering and/or mobile sports wagering in New York.”
The Gaming Commission demanded that Kalshi confirm that it had complied with the cease-and-desist letter and halted its offerings of sports-event contracts in New York. Again, the Gaming Commission warned that it “reserves all rights to investigate further and to levy and collect civil penalties and fines in connection with Kalshi’s prior, current, and any future activity related to sports wagering and/or mobile sports wagering in New York.
Kalshi has no option but to seek judicial relief. The Gaming Commission’s cease-and-desist letter, sent on a Friday evening, demands that Kalshi immediately cease operating in New York or face criminal and civil liability. Because its platform listed contracts that were be (sic) traded over the weekend, Kalshi has no other practical choice to protect its commercial interests and those of its users except to bring this suit. Absent judicial relief, Kalshi faces the prospect of criminal enforcement and civil penalties in New York as of the date of this filing.
The letter itself does not appear as a filing in Kalshi’s case as of early Monday morning.
Here’s the full complaint from Kalshi:
It’s the eighth known state to issue a cease-and-desist order to at least one prediction market operator. The others:
Arizona
Illinois
Maryland
Montana
Nevada
New Jersey
Ohio
Kalshi has brought federal lawsuits in four of these states (Maryland, Nevada, New Jersey, Ohio) to stop enforcement by the state. Massachusetts has also sued in state court to try to stop Kalshi from offering sports event contracts there.
PayNearMe has developed the gaming industry’s first platform that is purpose-built to dramatically improve the end-to-end payment experience. It enables operators to manage the entire payment journey, for all major forms of payment and through the most popular channels. With PayNearMe, operators gain full control of the payment flow, promoting acquisition, retention and efficiency. One platform, one integration—built to solve gaming’s toughest payments problems.
Prediction markets news roundup
ICYMI on Friday, Crypto.com is leaving Nevada for now:
Trump taps crypto regulator Mike Selig as new CFTC chair nominee (Politico): “President Donald Trump has tapped Mike Selig, a high-ranking cryptocurrency regulator, to lead the Commodity Futures Trading Commission, White House crypto czar David Sacks said early Saturday. Selig ‘is deeply knowledgeable about financial markets and passionate about modernizing our regulatory approach in order to maintain America’s competitiveness in the digital asset era,’ Sacks said in a post on X. The announcement came after Trump’s prior selection for the job ran into resistance from crypto billionaires Tyler and Cameron Winklevoss.”
“If confirmed, Selig would be charged with leading the small but powerful U.S. derivatives regulator just as it is expected to take on new authority over the nearly $4 trillion crypto market.”
Here is Selig on Twitter about his nomination:
I am honored to be nominated by President Trump to serve as the 16th Chairman of the U.S. Commodity Futures Trading Commission. With the President’s leadership, a Great Golden Age for America’s Financial Markets and a Wealth of New Opportunities stand before us. I pledge to work tirelessly to facilitate Well-Functioning Commodity Markets, promote Freedom, Competition and Innovation, and help the President make the United States the Crypto Capital of the World.
💡 My take: For the purposes of this newsletter, Selig is also going to be taking over as the person overseeing prediction markets. It will be interesting to see what his thoughts on the industry are and what kind of questioning he might face in the confirmation process.
The Company Making a Mockery of State Gambling Bans (The Atlantic): “Americans who want to bet on sports have many options. There’s DraftKings, FanDuel, ESPN Bet, Caesars, and BetMGM. There’s also BetRivers, Hard Rock, bet365, Fanatics, and Bally Bet. But none of those platforms are available in the 17 states where online sports betting remains illegal, including California and Texas. Kalshi, a prediction market, doesn’t have that limitation. Gamblers can use it to wager on the outcome of sporting events in all 50 states. That’s because, in the eyes of American law, Kalshi is not a gambling company at all; it’s an exchange that facilitates the trading of legitimate financial products. Over the past year, the company has added sports to the range of events that can be wagered on, while arguing that it is beyond the reach of any state-level gambling ban. It maintains that it can be regulated only by the federal Commodity Futures Trading Commission. But under the second Trump administration, the CFTC has shown no interest in cracking down. The result is that sports betting is now legal everywhere—even in the states where it isn’t.”
The Event Horizon is cited twice in the article in this passage: “The day after Kalshi rolled out its combos, the stock prices of DraftKings and FanDuel’s parent company each fell more than 10 percent. Kalshi knows that investors and customers think of it as a gambling company; in fact, its advertising encourages them to. One Kalshi social-media ad announces “BREAKING NEWS: SPORTS BETTING IN TEXAS IN NOW LEGAL” and that “Kalshi has legalized sports betting in all 50 states.” (When I asked Mansour about this kind of advertising, he said, “The minute we basically saw them, we basically took them down.” This type of ad was first spotted in February, and Kalshi re-upped them as recently as last month.)”
California Tribes Definitely Have Federal Judge On Their Side, But Eventual Ruling Will Be Legal, Not Moral (InGame): “If U.S. District Judge Jacqueline Corley could rule on the motion for a preliminary injunction against Kalshi in the Blue Lake Rancheria et al v. KALSHI INC. et al case based on morality, it seemed clear Thursday that she would side with three tribes asking to ban the platform from their land.”
“During a more than 90-minute hearing in which she heard from lawyers representing Blue Lake, Chicken Ranch Rancheria of the Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians, as well as defendants Kalshi and Robinhood, Corley repeatedly circled back to this question: Why doesn’t Kalshi just back down and stay off Indian land? Among her musings in open court:”
“There have been enough fights in our country with the Indians, and maybe we don’t need any more.”
Betting Scandals Are Rocking Sports. Will Prediction Markets Help or Hurt? (Decrypt): “Now, as federal law enforcement casts a spotlight on, effectively, insider trading in sports betting, some experts are becoming increasingly concerned with the migration of sports betting to prediction markets—while others argue such betting platforms, when they make use of public blockchain networks, will provide an added layer of transparency. Former government regulators and legal experts told Decrypt the transition to prediction markets could make the already daunting task of monitoring sports betting much harder—and lead to a proliferation of misconduct on sports-related wagers.”
