Quick Breakdown
- Kalshi has filed a federal lawsuit against New York regulators over claims its sports contracts are unlicensed gambling.
- The firm argues that the CFTC holds exclusive authority under the Commodity Exchange Act, making state enforcement unconstitutional.
- Despite mounting legal challenges, venture capital firms continue to back Kalshi, valuing it as high as $12 billion.
Kalshi takes legal action against new york state gaming commission
Event contract platform Kalshi has filed a federal lawsuit against New York regulators after the state accused the firm of running unlicensed gambling operations. The complaint, submitted on October 27, challenges the New York State Gaming Commission’s cease-and-desist order issued three days earlier, which warned of civil and criminal penalties for alleged illegal sports wagering.
Kalshi said the state’s action left it with
“no other practical choice”
but to defend its business and users through legal means, arguing that the move threatens
“immediate and irreparable harm.”
Federal vs. state jurisdiction: a battle over regulatory authority
At the heart of Kalshi’s argument is the Commodity Exchange Act (CEA) and its 1974 amendments, which the company says grant the Commodity Futures Trading Commission (CFTC) exclusive authority over federally regulated exchanges.
According to Kalshi, New York’s attempt to classify sports-event contracts as gambling oversteps federal jurisdiction, effectively “invading a field Congress has preempted.” The company asserts that applying state gaming laws to a CFTC-approved market undermines federal oversight and creates regulatory confusion.
Legal expert Daniel Wallach, founder of Wallach Legal LLC, said Kalshi’s decision to file in federal court may be a strategic move to avoid an “almost automatic loss” under New York’s constitutional prohibition on sports gambling.
News: Kalshi files federal lawsuit against New York State after receiving cease-and-desist letter from @NYSGamingComm on Friday evening and will soon be filing a motion for preliminary injunction to prevent NYS from from enforcing its gambling laws vs. Kalshi. (h/t @akhoya87) pic.twitter.com/GfONveCQx4
— Daniel Wallach (@WALLACHLEGAL) October 27, 2025
Precedents across states: mixed legal outcomes
Kalshi’s legal strategy mirrors past cases in Nevada and New Jersey, where courts temporarily barred regulators from enforcing state gaming laws on its federally regulated markets.
Interestingly, Crypto.com failed to secure similar protections in Nevada, where a federal judge ruled that its sports markets did not meet the legal definition of “swaps” under the CEA, forcing the exchange to geofence the state by early November.
Nationwide scrutiny and investor confidence
As of October 28, at least eight states — including Arizona, Illinois, Maryland, Montana, Nevada, New Jersey, Ohio, and New York — have issued cease-and-desist or warning letters against Kalshi’s sports-event markets. The company has filed lawsuits in Maryland, Nevada, New Jersey, and Ohio to challenge those actions.
If you would like to read more articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.
Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”
