Securities Regulation Daily Wrap Up, FEDERAL PREEMPTION—S.D.N.Y.: Kalshi seeks to block enforcement by New York gaming commission on sports betting, (Oct 28, 2025)
Law Firms Mentioned:Milbank LLP
Organizations Mentioned:KalshiEX LLC | Milbank, LLP
As in similar complaints against other state gaming regulators, Kalshi contends that only the CFTC has authority to regulate its sports-event contracts.
The Kalshi financial services company has added New York State gaming regulators to a growing list of state entities it is suing over enforcement actions relating to sports betting. In a new complaint in federal district court, Kalshi argues that federal preemption prevents the gaming commission from regulating its sports-related event prediction contracts under state law (KalshiEx LLC v. Williams, No. 1:25-cv-08846-AT (S.D.N.Y. Oct. 27, 2025)).
“New York’s attempt to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated exchanges,” Kalshi stated in the complaint.
Kalshi is seeking injunctive and declaratory relief.
Parties. Kalshi is a financial services company that operates a CFTC-registered derivatives exchange and prediction market where traders can buy and sell contracts that predict event outcomes, like the winner of the Super Bowl.
The New York State Gaming Commission regulates legal gambling in the State of New York. Kalshi is also suing eight Commission officials in their official capacity.
Jurisdiction. Kalshi asserts jurisdiction under the federal question of whether New York law is preempted by the federal law (Commodity Exchange Act or CEA) as applied to Kalshi’s event contracts.
Facts. Kalshi was designated as a contract market by the CFTC in 2020.
On the Kalshi trading platform, traders exchange positions on event contracts with other traders. Event contracts commonly involve a binary question in the form of a “yes” or “no” position. For example, in a contract on whether an earthquake will take place in Los Angeles County before December 31, 2025, the “yes” position would pay out if an earthquake does take place in Los Angeles County before the end of the calendar year.
Kalshi also offers sports- event contracts. For example, Kalshi allows users to place positions on which teams will advance in certain rounds of the NCAA College Basketball Championship or who will win the U.S. Open Golf Championship.
Kalshi said the CFTC has declined to review any of its sports-event contracts.
According to the complaint, the New York State Gaming Commission sent Kalshi a cease-and-desist letter on October 24, 2025, claiming that offering event contracts based on sporting events “within New York State” without a sports gaming license violated New York law. The Commission directed Kalshi to “cease and desist immediately from illegally advertising, promoting, administering, managing, or otherwise making available sports wagering and/or a mobile sports wagering platform in New York.”
Claims. Kalshi argues that enforcement under New York’s Racing Law Sections 104 and 1367 and Penal Law Section 225.00(2) is preempted by the CEA under the Supremacy Clause, Article VI, Clause 2, of the U.S. Constitution.
Kalshi says the defendants are “impermissibly intruding” on the CFTC’s exclusive authority to regulate futures trading on CFTC-regulated exchanges. Specifically, a CEA provision authorizes the CFTC to determine whether event contracts involving “gaming” should be restricted as “contrary to the public interest.” In Kalshi’s view, this is “completely incompatible with parallel state regulation of the same putative subject matter.”
According to Kalshi, New York’s efforts to regulate it are both field-preempted and conflict-preempted. “Federal law occupies the entire field of regulating trading on designated contract markets” and “the defendants’ threatened actions conflict with federal law and policy.”
Relief sought. Kalshi is seeking preliminary and permanent injunctions as well as declaratory relief.
Other sports betting litigation. Kalshi is suing other state gaming commissions over similar state gambling law disputes in federal district court, including Nevada, New Jersey, and Maryland, among others. Kalshi is also being sued by several Indian tribes over alleged unlicensed sports betting.
For more, read Battle royale kicks off as financial exchanges move into sports betting markets.
The case is No. 1:25-cv-08846-AT.
Attorneys: Andrew Leighton Porter (Milbank LLP) for KalshiEX LLC.
Companies: KalshiEX LLC
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