New York‘s Governor and Attorney General have filed a lawsuit against Kalshi, seeking $36 billion in damages. The Commodity Futures Trading Commission (CFTC) is defending the company, filing its own motion for a temporary restraining order to prevent New York’s enforcement action.
New York’s lawsuit comes swiftly after the Second Circuit denied Kalshi an injunction to prevent the state from taking enforcement action against the company.
“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Governor Kathy Hochul (pictured above) said in a press release.
Kalshi Could Pay $100K for Every Sports Market
The $36 billion in damages includes three times the company’s gains, plus $100,000 for every sports market offered on the platform in the state.
“New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law,” Hochul added.
Alongside the lawsuit, New York has also filed a motion for a temporary restraining order that could result in Kalshi being blocked in the state.
CFTC Responds With Emergency Order
The CFTC preempted Hochul and James’s action by filing for an emergency restraining order. The filing said the order is necessary to prevent New York from “pursuing criminal or civil enforcement actions related to event contracts listed on CFTC-regulated DCMs”.
Gaming lawyer Daniel Wallach described the action as a “Hail Mary filing.”
Kalshi Users Could Be Refunded
Attorney General Letitia James highlighted that Kalshi is offering its markets to 18- to 20-year-olds despite the legal gambling age being 21.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” said James.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple. By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process. We are taking them to court to uphold our laws and protect New Yorkers.”
The $36 billion in compensation would refund users who have traded on Kalshi’s markets. A group of self-described gambling addicts also filed a lawsuit in New York against Kalshi, claiming losses on the platform should be invalidated.
Kalshi vs. New York Timeline
The battle between New York state authorities and Kalshi goes back to October last year, when the New York State Gaming Commission (NYSGC) sent the company a cease-and-desist letter.
- October 24: NYSGC sends Kalshi cease-and-desist letter
- October 27: Kalshi responds by suing the NYSGC, seeking an injunction
- October 28: NYSGC agrees not to take action until the court rules on the injunction
- April 21: AG James sues Coinbase and Gemini
- April 24: CFTC sues New York
- July 7: Judge denies Kalshi’s motion for injunction
- July 8: Kalshi appeals to the Second Circuit
- July 29: Second Circuit denies Kalshi injunction
- July 30: CFTC files for emergency restraining order to prevent NY enforcement
- July 30: New York sues Kalshi and files for temporary restraining order
The Second Circuit ruling is not final. The court declined to issue an injunction and referred the matter to a three-judge panel. If the judges decide to grant Kalshi an injunction after that, this would stop New York’s enforcement action.
A judge in Minnesota partially sided with the company earlier this week, preventing the state from introducing a law banning prediction markets. The state may still seek to take action against the operator’s sports markets, which New York has largely focused on.
