Kalshi Sues New York Gaming Regulator Over Federal Preemption
Prediction market operator KalshiEX LLC has filed suit against the New York State Gaming Commission and its executive members. The financial firm seeks to stop New York from interfering with its federally regulated derivatives exchange. The move follows a threat of penalties from the state regulator. Legal expert Andrew Kim was the first to report the filing.
State Cease-and-Desist Letter Triggered Lawsuit
Kalshi’s action comes after the New York State Gaming Commission sent a cease-and-desist letter on October 24, 2025. The letter directed Kalshi to immediately stop offering sports-event contracts in New York.
The Commission argued that Kalshi needed a state sports betting license to offer these contracts and threatened imminent civil penalties and fines. Kalshi also claims the state implicitly threatened criminal action.
Kalshi, which operates a Designated Contract Market (DCM), is under the exclusive jurisdiction of the federal Commodity Futures Trading Commission (CFTC).
Kalshi argues that the state’s action is unconstitutional under the Supremacy Clause. This clause asserts that federal law preempts state law when the two conflict.
Kalshi Cites Exclusive CFTC Authority
Kalshi filed the suit seeking a Permanent Injunction and Declaratory Relief. The firm argues that the federal Commodity Exchange Act (CEA) gives the CFTC sole authority to regulate derivatives trading. Kalshi contends that Congress passed the CEA to prevent “total chaos” that would arise from 51 different jurisdictions regulating these markets.
New York is attempting to regulate contracts that are fully permissible under federal law. Kalshi asserts that this state action violates the principle of federal preemption. The company claims the Commission’s letter presented a “Hobson’s choice,” forcing them to face serious economic and reputational harm by complying or civil and criminal liability by continuing operations.
Kalshi is asking the court to block New York from enforcing state gambling laws against the exchange. The defendants in the case include Executive Director Robert Williams and Commission Chair Brian O’Dwyer, among other commissioners, all sued in their official capacity.
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