Kalshi Sues New York to ‘Protect’ Sports Prediction Markets

Kalshi a federally regulated derivatives exchange filed a lawsuit in the United States District Court for the Southern District of New York challenging the state’s attempt to shut down its sports prediction markets arguing that New York’s enforcement actions violate federal authority over derivatives ￰2￱ complaint

filed as KalshiEX LLC ￰3￱ Williams seeks to stop the New York State Gaming Commission from imposing civil penalties and fines on the Manhattan-based exchange for offering event contracts that allow users to speculate on sports outcomes.) March 30 2025 The exchange operates under the Commodity Exchange Act which Congress deliberately designed to preempt state regulation and prevent a patchwork of potentially conflicting state laws across all 51 ￰4￱ oversight requires Kalshi to maintain extensive recordkeeping

meet liquidity standards prevent market manipulation and enforce position limitations across a nationally accessible ￰5￱ York gaming regulators countered that Kalshi’s sports-based contracts constitute sports wagering under state Penal Law and Racing Law requiring a sports gaming license to operate legally within state ￰6￱ commission threatened criminal action and civil penalties unless Kalshi immediately ceased offering what regulators characterized as illegal gambling opportunities to New York ￰7￱ Market’s Existential Threat The lawsuit extends beyond Kalshi’s immediate business concerns

potentially affecting how prediction markets operate across state lines amid diverging regulatory ￰8￱ recently filed similar lawsuits in New Jersey and Nevada after those states refused to recognize federal court rulings favoring Kalshi with officials warning the brokerage firm that offering event contracts would constitute willful violations of law. @RobinhoodApp has sued Nevada and New Jersey accusing the states of unfairly blocking its entry into the sports event contracts. #Robinhood #Crypto ￰0￱ — ￰9￱ (@cryptonews) August 20 2025 Event contracts function as derivatives that allow stakeholders

such as advertisers sponsors networks and sportsbooks

to hedge exposure to economically significant sports outcomes with prices fluctuating based on market perceptions of event ￰10￱ argues that blocking access to these federally authorized instruments imposes substantial economic and reputational harm while creating uncertainty for consumers and business ￰11￱ platform faces a potential existential threat if forced to implement state-by-state restrictions as the CFTC could take action against it for violating requirements that designated contract markets operate as truly national exchanges accessible to all ￰12￱ noted that developing technological solutions to block specific state residents while maintaining platform integrity would require complex

untested systems that could undermine Kalshi’s regulatory ￰13￱ York’s Growing Regulatory Tensions New York’s aggressive stance toward prediction markets resembles broader state-level efforts to regulate emerging financial technologies including cryptocurrency transactions that remain outside comprehensive federal ￰14￱ August state Assembly Member Phil Steck introduced legislation imposing a 0.2% excise tax on all digital asset transactions with proceeds earmarked for upstate school substance abuse prevention ￰15￱ proposed tax

which should have taken effect on September 1 2025 places compliance responsibility on anyone making or effectuating crypto transfers potentially creating challenges for exchanges

traders and decentralized finance ￰16￱ York Assembly bill seeks a 0.2% excise tax on crypto and NFT transactions targeting the digital asset sector for substance abuse prevention funding. #Crypto #Tax ￰1￱ — ￰17￱ (@cryptonews) August 15 2025 Assembly Bill A08966 defines digital assets broadly as anything issued or transferred using distributed ledger or blockchain technology

encompassing currencies coins and non-fungible ￰18￱ jurisdictions have pursued vastly different approaches to crypto taxation and regulation ranging from the United Arab Emirates’ emerging tax reporting framework to Hong Kong’s full licensing regime that encourages crypto business growth.