Kalshi has filed a lawsuit in Manhattan US District Court against the New York State Gaming Commission (NYSGC), alleging the regulator has overstepped its authority after threatening the predictions marketplace with criminal action for operating throughout the Empire State.
"Defendants have implicitly threatened Kalshi with criminal action and explicitly threatened Kalshi with civil penalties, including fines, unless it shuts down these contracts in New York immediately," Kalshi stated within the filing.
"One of Congress' avowed goals in creating the CFTC was to avoid the 'chaos' that would result from subjecting exchanges to a patchwork of 51 different - and potentially conflicting - state laws."
Kalshi stated any regulation conducted by the Commodity Futures Trading Commission (CFTC) "preempts" that of state authorities due to its contracts being structured as binary options, and believes potential threats may harm not only its own operations, but those of its business partners such as Robinhood Markets.
The lawsuit was filed on October 27, as Kalshi also requested the federal judge presiding over the case immediately prohibit the NYSGC from taking any legal enforcement action against the platform and stated its "operating legally" in New York under federal law.
A spokesperson for the NYSGC directed local reporters such as Bloomberg to a cease-and-desist letter sent to Kalshi on October 24, stating the order "speaks for itself" and had no additional comment at the time of writing.
Kalshi was sued by one of its former players for the losses of all persons who utilized the platform in the US earlier in October, as Daniel Yee is seeking a federal injunction to recover the losses of all players who have wagered, and lost, on the platform, both across the US and within New York and California.
Yee's suit alleges Kalshi's offerings are neither legal, nor regulated, within the realms of sports betting and is enacting a 1710 legal course which allows a given losing party to sue a given winning party for the value of losses.
The prediction markets industry has certainly been growing as of late, beginning with FanDuel's partnership with derivatives marketplace CME Group to begin the development of "fully funded, event-based contracts with defined risk," where customers will have the opportunity to "express their views" multiple times a day on numerous markets with "yes" or "no" positions for as low as $1.
The collaboration is set to prompt the launch of FanDuel Markets, as CME Group and FanDuel will form a new joint venture to operate a non-clearing futures commission merchant (FCM) and offer access to event-based contracts through the sports betting operator. Event contracts will then be listed on and "subject to the rules" of CME Group exchanges and available to consumers through all participating FCMs.
DraftKings acquired Railbird Technologies and its wholly owned subsidiary, Railbird Exchange, on October 21 to officially begin offering prediction markets to users and support the operator's future growth in the gaming type.
Financial terms of the agreement have yet to be released, but Railbird Exchange currently serves as a federally licensed exchange designated by the CFTC, helping to establish a "strategic foundation" for DraftKings' growth in prediction markets.
The new venture, titled DraftKings Predictions, will allow users to trade regulated event contracts on "real-world outcomes," including the finance, culture and entertainment industries. While sports-related event contracts were not specified, the operator stated it "may expand" the offering into additional categories "over time."
Kalshi announced its expansion to more than 140 countries on October 10 following a recent $300m funding round led by Sequoia Capital and a16z, which brought the company's valuation to approximately $5bn
