The New York Gaming Commission has taken legal action against Kalshi over its failure to comply with investigative subpoenas.
The dispute concerns documents regulators need to examine the prediction market platform’s operations and potential gambling violations.
State officials want judicial intervention after months of unsuccessful attempts to obtain the requested records. The case adds another legal challenge to Kalshi’s ongoing dispute over federal and state regulatory authority.
The Commission filed a verified petition against Kalshi Inc. and KalshiEX LLC in New York County Supreme Court. The court registered the filing on October 22, before attorney Daniel Wallach disclosed it publicly on October 23.
The petition seeks enforcement of subpoenas issued July 31 under Section 104(7) of New York’s Racing Law. The Commission alleges Kalshi rejected important requests and provided inadequate responses to others.
New York gaming commission demands Kalshi’s betting records
The New York Gaming Commission wants four categories of documents covering Kalshi’s operations, customers, advertising, and corporate ownership.
Regulators requested information about sports-event contracts and products available to New Yorkers younger than 21. They also demanded advertising materials describing event contracts as bets or wagers.
The Commission additionally wants records detailing Kalshi’s ownership and corporate structure. These documents could help regulators determine potential penalties against Kalshi and other parties.
The petition alleges Kalshi operated an unlicensed sports wagering business in New York for at least 18 months. However, the filing introduces no additional violations, and Kalshi has not publicly responded.
Kalshi defends federal oversight as New York challenges operations
Kalshi maintains that its event contracts qualify as financial derivatives under Commodity Futures Trading Commission oversight. The company argues that federal commodities law prevents states from applying gambling restrictions to those contracts.
However, New York could use Kalshi’s advertising language to support its classification of the products as wagers. Regulators also question access for customers aged 18 to 20, while licensed New York sportsbooks require customers to be 21.
Attorney General Letitia James and Governor Kathy Hochul sued Kalshi on July 31. Their lawsuit seeks forfeiture, restitution, and triple fines, alleging damages of at least $36 billion.
Kalshi transferred that lawsuit to federal court the same day. Separately, Judge Torres denied Kalshi’s preliminary injunction request on July 7.
The judge found that federal commodities law likely did not override New York gambling restrictions on sports contracts. The Second Circuit rejected Kalshi’s emergency request on July 29, leaving its appeal pending.
Meanwhile, the CFTC’s August 11 emergency order allows Kalshi to continue trading in New York. Whether that protection extends to state investigative subpoenas remains unresolved.
Kalshi faces conflicting appeals court decisions
Federal appeals courts have reached different conclusions about state authority over prediction markets.
The Third Circuit supported Kalshi in New Jersey through an April ruling decided 2-1. However, the Ninth Circuit rejected its position in Nevada through a unanimous August decision.
The Sixth Circuit followed with another unfavorable ruling covering Ohio and Tennessee on September 25. Kalshi consequently holds one victory and two defeats across those appeals courts.
Meanwhile, Utah recently sued Kalshi, seeking geographic restrictions and up to $61.2 million in fees. Ohio requires licensed gaming operators to end prediction market relationships by October 30.
The CFTC has also sued New York, Arizona, Connecticut, and Illinois, seeking exclusive federal authority over event contracts.
Kalshi’s New York headquarters could expose it to contempt proceedings if it disobeys a court order. No Manhattan hearing date has emerged, and Kalshi could seek to transfer the subpoena dispute to federal court.
