New York sued Kalshi, a federally regulated prediction exchange, on Friday, alleging that its contracts on sports, elections and entertainment amount to illegal gambling dressed up as financial trading.
However, the potential consequences extend well beyond a conventional state ban.
- The Coinformer's review of the 32-page petition found that Attorney General Letitia James wants Kalshi to identify each customer and itemize every bet, customer loss and company gain connected to the alleged violations.
The state also seeks full restitution for customers, the surrender of all allegedly unlawful proceeds and a separate penalty equal to three times Kalshi's gain. For sports markets, it wants an additional $100,000 for each unauthorized offering or attempted offering within or from New York.
A wider shutdown
Although Kalshi is registered with the Commodity Futures Trading Commission, the federal derivatives regulator, New York argues that the economic substance is still gambling.
Crucially, the requested injunction would cover contracts on "sports, culture, elections, and other events," rather than sports alone. It would also prohibit an unlicensed gambling business operated "within or from New York or to persons in New York."
Whether a court would grant such a broad order remains uncertain.
The petition doesn't assign a fixed dollar amount to the requested damages, though. Although one published estimate put Kalshi's potential exposure at at least $36 billion, that figure isn't stated in the filing and depends on how a court defines the company's gain and each unlawful offering.
The CFTC filed an emergency motion seeking to stop New York's enforcement shortly before the lawsuit, Reuters reported. Kalshi called the action "political theater," arguing that states can't close a federally licensed exchange.