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Kalshi sues New York regulator in landmark prediction-market case

By Phil Lowe

28 Oct 2025

Phil Lowe 28 Oct 2025

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Test case for crypto-enabled prediction markets

(Photo by Kayla Wolf for The Washington Post via Getty Images)

The prediction-market operator Kalshi Inc. has filed a lawsuit in Manhattan federal court against the New York State Gaming Commission (NYSGC), claiming the regulator is unlawfully attempting to apply state gaming laws to contracts that Kalshi says are regulated federally as derivatives.

Kalshi’s complaint alleges that the NYSGC has "implicitly threatened criminal action and explicitly threatened civil penalties, including fines, unless Kalshi shuts down" its sport-event and financial-outcome contracts in New York.

For its part, the NYSGC argues that these contracts fall within its remit because they operate like wagers.

The dispute crystallises the regulatory boundary between derivatives-style contracts and gambling/wagering in the context of crypto-enabled and event-based markets.

A Kalshi statement said the company "are operating legally under federal law and will not yield to state overreach."

Kalshi’s business model involves event-based contracts—such as sports outcomes, election results or economic indicators - which have grown in popularity among crypto-native and trading-savvy investors.

In 2025, the broader prediction-markets segment has shown rapid expansion, with platforms like Polymarket preparing token launches and airdrops designed to reward users.

For the crypto-betting and prediction-market sectors this lawsuit matters. If state regulators win the case, many event-contract platforms may be required to obtain traditional gaming licences in New York or cease operations there.

Platforms may potentially need to reassess their contract design, geoblocking practices and regulatory strategy to avoid being classified as unlicensed gambling.

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