Kalshi sues New York regulators over event contracts rules

Why the New York fight matters now

Kalshi’s challenge to New York’s authority lands after months of mounting friction between state gambling regulators and federally supervised prediction markets. The dispute turns on a core question: Are “event contracts” on sports a financial product under federal commodities law, or a form of sports betting that requires a state license? The answer will shape whether prediction platforms can scale sports-linked markets nationwide without adopting the same compliance burdens as sportsbooks.

Across the country, regulators have been signaling a tougher line. Nevada last week told its casino and sportsbook licensees that sports event contracts count as wagers and require a full sports pool license in the state. Massachusetts has sued Kalshi for allegedly running an unlicensed online sports wagering business. Ohio has gone to federal court territory over preemptive enforcement, and Michigan has flagged consumer and tax risks to the federal derivatives regulator. Together, the moves sketch an enforcement map that complicates Kalshi’s bid to expand sports offerings under Commodity Futures Trading Commission oversight.

Nevada draws a hard line

Nevada’s stance set a clear benchmark. In a notice circulated to operators, the regulator said sports event contracts fall under the state’s definition of wagering, even when listed on platforms regulated by the CFTC. Complete iGaming reported the guidance in detail in Nevada Gaming Control Board warns licensees that sports event contracts are wagers, which underscored that offerings on competitions like the World Series of Poker, esports or even the Oscars cannot be run in Nevada absent a sports pool license.

The regulator warned that partnering with firms offering such contracts elsewhere without proper authorization could threaten a licensee’s suitability. The notice reinforced that Nevada views prediction-style contracts tied to sports outcomes as functionally equivalent to bets. The board’s position is publicly documented in Notice 2025-77, which has quickly become a reference point for other jurisdictions weighing their own responses.

Pennsylvania officials have also urged federal scrutiny. As noted in the Nevada story, the Pennsylvania Gaming Control Board’s leadership asked lawmakers to press the CFTC on the growth of sports prediction markets, reinforcing that concerns are not confined to one state.

Massachusetts escalates enforcement

Massachusetts moved past guidance and into litigation. Attorney General Andrea Joy Campbell sued Kalshi in state court, alleging the company promotes and accepts online sports wagers without a license. The state argues that “yes/no” contracts on outcomes like moneylines, point spreads and totals are indistinguishable from conventional sportsbook offerings. The Complete iGaming account, Massachusetts Attorney General sues Kalshi for illegal sports wagering operations, details the claim that Kalshi bypasses consumer safeguards, including age limits and responsible gaming tools required under state law.

The complaint says Kalshi markets to users ages 18-20 even though the legal online sports betting age is 21. It also cites the company’s promotion across social and television and the ability to access trading through brokerage platforms. The suit frames those practices as risk multipliers given the absence of state-tested protections. The filing is posted publicly as the final complaint. Campbell’s office has been building a broader policy architecture around youth gambling risk, highlighted in a public-private initiative described in the announcement of the Youth Sports Betting Safety Coalition.

The Massachusetts Gaming Commission chair backed the AG’s lawsuit, saying prediction market firms expanding into sports wagering have operated without state taxes or player-protection requirements. That endorsement signals alignment across state enforcement and regulatory arms, a dynamic that often accelerates case timelines and settlement pressure.

Ohio and Michigan raise the stakes

Ohio has met Kalshi in federal court. In Kalshi sues Ohio in a bid to prevent being blocked from operating, the company alleges the Ohio Casino Control Commission and the attorney general’s office are overreaching by threatening to block its sports futures products. Kalshi says those threats chilled potential partnerships and that federal law should preempt state efforts. Ohio counters that sports betting is a state-licensed activity and warned licensed sportsbooks that affiliating with Kalshi, even outside Ohio, could jeopardize their approvals. The case seeks an injunction to keep Kalshi’s operations from being shut out while the legal questions are tested.

Michigan is pushing the jurisdictional debate back toward Washington. The Michigan Gaming Control Board wrote to the CFTC questioning whether sporting event contracts comport with state law and consumer protection norms. The Complete iGaming piece, Michigan regulator registers concern over event contracts with CFTC, outlines the board’s argument that these products are tantamount to internet sports betting and must adhere to the state’s licensing, background checks, fund security and integrity monitoring standards.

Michigan also emphasized the fiscal impact. Legal sportsbooks delivered more than $20 million in state taxes and fees in 2024, the regulator said, a revenue stream at risk if sports event contracts migrate outside the licensed system. That framing aims squarely at a key CFTC test about whether such contracts serve the public interest.

How sports listings changed the calculus

The flashpoint for many states is Kalshi’s move into sports-linked markets. As reported in Prediction market Kalshi launches event contracts on sports, the platform submitted paperwork to the CFTC and began listing “will [team] win [title]” contracts around Jan. 23. The model allows traders to buy contracts that pay out if the event occurs, mirroring the binary structure of common wagers. While Kalshi frames these as financial instruments, the everyday user experience can look and feel like sports betting, a point state officials have seized in warnings and lawsuits.

Regulatory tensions were already elevated after the CFTC pressed Crypto.com to pull Super Bowl markets pending review, a request the platform reportedly ignored. And Kalshi’s earlier fight with the CFTC over election contracts, which it ultimately won, showed prediction markets could prevail on federal grounds. That history likely emboldened the company to expand into sports while testing state limits.

The backdrop has only grown more complex. Kalshi and rival Polymarket recently signed a multiyear partnership with the NHL to access league data and rights for their platforms. That kind of mainstream tie-up raises the stakes for regulators weighing how to classify and police event markets tied to sports and pop culture. It also highlights a strategic pivot by prediction firms toward partnerships that have long underpinned the growth of regulated sportsbooks.

What to watch in the jurisdictional clash

New York’s case will test how far state gambling law can reach into federally supervised markets when the underlying product relates to sports outcomes. If courts bless a broad state definition of wagering, prediction platforms may need to secure sports betting licenses, limit under-21 access and implement responsible gambling controls market by market. That could slow national rollouts and raise costs.

If Kalshi’s preemption theory gains traction, states may be pushed to seek relief through federal rulemaking or legislative channels, as Michigan has urged. Either way, the outcome will ripple beyond one platform. Brokerages and data partners, wary of suitability risks highlighted in Nevada’s guidance, will watch for clarity before deepening ties. And as Massachusetts’ complaint and Ohio’s warnings show, the next wave of enforcement may target not only platforms but also their affiliates.