Kalshi Sues New York Gaming Regulator After Receiving Cease-And-Desist Letter
Kalshi has taken the New York State Gaming Commission (NYGC) to court after the state regulator sent the prediction market operator a cease-and-desist letter on Friday, October 24. The NYGC requested that Kalshi close its illegal and unlicensed sports wagering platform.
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Familiar Playbook
Kalshi's lawsuit in New York has followed the same formula across multiple states, suing Maryland, Nevada, New Jersey, and Ohio for cease-and-desist letters sent. In each lawsuit, Kalshi has argued that state regulators are overreaching their regulatory position.
That argument stems from the prediction market operator's position as being regulated by the Commodity Futures Trading Commission (CFTC) through its designated contract market license. Kalshi's position is that this status enables them to bypass state laws. State regulators disagree.
In its lawsuit, Kalshi is seeking a temporary injunction against the New York State Gaming Commission to avoid "immediate and irreparable harm." Kalshi has successfully received a temporary injunction against the Nevada and New Jersey gaming commissions and is using those precedents to support its request in this lawsuit.
Maryland Precedent Can't Be Forgotten
While Kalshi successfully received a temporary injunction in Nevada and New Jersey, it did not get one in Maryland. There, Judge Adam Abelson ruled that the company failed to show Congress "intended for the Commodity Exchange Act (CEA) to completely preclude any state gaming laws" and that, therefore, it "failed to show a likelihood of success" in its lawsuit.
Kalshi has appealed the decision; a verdict has yet to be determined. We may not see one till the New Year. However, the precedent still stands.
Crypto.com Forced Out of Nevada After Failure
Since Judge Abelson's decision in Maryland, we've seen a second legal loss for prediction markets, this time back in Nevada. There, Crypto.com surprisingly failed in its request for a preliminary injunction against the state's gaming commission.
The same judge who handed Kalshi a preliminary injunction decided not to give one to Crypto.com, because its sports event contracts were not swaps.
While Crypto.com is appealing the decision, the operator will not offer sports event contracts in Nevada, effective November 3. This is the first true setback to prediction markets in the US.
California and Massachusetts Go On The Offensive
Kalshi's court activities aren't limited to Maryland, Nevada, New Jersey, New York, and Ohio. The company is also facing legal pressure in Massachusetts and California, where the Attorney General and native tribes have gone on the offensive.
In Massachusetts, Attorney General Andrea Joy Campbell has sued Kalshi for operating an unlicensed sportsbook. Campbell has stated that the lawsuit isn't to force the company out of Massachusetts but instead to "ensure that if Kalshi wants to be in the sports gambling business in Massachusetts, they must obtain a license."
In California, the Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and the Picayune Rancheria of the Chukchansi Indians are seeking a preliminary injunction against Kalshi for operating illegal gaming on its lands, which violates the Indian Gaming Regulatory Act (IGRA).
