On Friday, the New York State Gaming Commission filed suit in state court against Kalshi, requesting that the court compel the prediction market platform to comply with subpoenas linked to the ongoing NYSGC investigation. The lawsuit marks yet another chapter in what remains a heated dispute over the categorization of sports event contracts and whether they should enjoy immunity from state gaming enforcement.
A social media thread shared by gaming attorney Daniel Wallach contains a partial copy of the NYSGC’s latest legal action. Topics of interest include the commission’s continuing investigation into Kalshi for allegedly offering underage gambling to New York residents, violation of the state’s Racing Law, and potential civil enforcement actions against associated Futures Commission Merchants (FCMs).
“There can be no genuine dispute that the Gaming Commission has a legitimate basis to investigate both Kalshi’s unlicensed activities and the activities of third parties that might facilitate those activities (e.g., Futures Commission Merchants),” states the lawsuit. “The Gaming Commission seeks the documents and information requested in the subpoenas so it can determine whether to issue civil penalties against Kalshi and others for violations of the Racing Law and, if so, in what amounts.”
In late July of this year, New York filed a $36 billion lawsuit against Kalshi that cited potential underage gambling, the state’s Racing Law, and the exchange’s sports event contracts. Technically, Kalshi is one of several CFTC-regulated prediction markets that operate under the jurisdiction of the federal agency headed by chairman Mike Selig.
That hasn’t stopped states from seeking enforcement actions against Kalshi, though. Since the beginning of this calendar year, Kalshi’s sports contracts have been geoblocked in Massachusetts, Nevada, Michigan, Washington, and within three tribal territories located in California.
Back in July, a ruling issued by US District Judge Analisa Torres denied Kalshi a preliminary injunction against New York’s intended enforcement against the exchange. As a result, the state now has a clear path to seek civil penalties and possible geo-blockades of Kalshi’s sports event contracts.
However, compliance with the subpoenas issued by the NYSGC is now an issue that must be decided in the Manhattan state court. New York has requested an expedited briefing and resolution of the motion to compel Kalshi to turn over the requested information. Because of this, the state court’s ruling is expected at some point before the New Year.
An adverse ruling for Kalshi would likely result in the prediction exchange appealing the decision while attempting to hold off any civil penalties or geo-blockades until one or more prediction market cases are heard by the US Supreme Court.
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