New York Wants Four Sets of Records
The subpoenas cover Kalshi’s sports-event contracts, its offerings to New Yorkers under 21, advertising that describes its products as wagers or bets, and its ownership and corporate structure. The Commission says it needs them to decide whether to fine the prediction market “and others”, and by how much. The petition alleges Kalshi has run a sports wagering business in New York for at least 18 months without the license the Racing Law requires.
Kalshi’s Defense Rests on the Derivatives Label
Kalshi has always stated that its event contracts are financial products overseen by the Commodity Futures Trading Commission and that therefore state gambling laws do not reach them. If its own ads describe those event-based contracts as bets, New York can point to Kalshi’s marketing as evidence that even the company sees them as wagers.
The under-21 request carries a very similar risk as well. Licensed sportsbooks in New York can only serve customers 21 and older and the attorney general’s July lawsuit alleged that 18 to 20 year olds can trade on the platform.
Kalshi is also headquartered in New York City, so ignoring a state court order would risk contempt at home. The CFTC’s August 11 emergency order keeps Kalshi trading in the state, though it’s unclear whether that shields it from a state investigative subpoena.
The Petition Opens a Third Front
Attorney General Letitia James and Gov. Kathy Hochul sued Kalshi on July 31, seeking forfeiture, restitution and triple fines, with claimed damages of at least $36 billion. Kalshi moved that case to federal court the same day.
The case that matters most is Kalshi’s own. On July 7, Judge Torres denied its request for a preliminary injunction, finding federal commodities law likely doesn’t preempt New York gambling law for sports contracts. The Second Circuit turned down Kalshi’s emergency request on July 29, and its appeal is still pending. That ruling decides whether New York can regulate Kalshi at all. The subpoena fight shows the Commission building its penalty file in the meantime.
Appeals Courts Have Split on State Authority
Kalshi is fighting the same question in courts across the country: can states apply their gambling laws to its sports contracts, or does federal commodities law override them? Each case goes to the federal appeals court that covers that state, and so far they disagree.
The Third Circuit, which covers New Jersey, sided with Kalshi 2-1 in April. The Ninth Circuit ruled 3-0 against it in Nevada in August. On September 25, the Sixth Circuit did the same in Ohio and Tennessee. That leaves Kalshi with one win and two losses at the appeals level. Its New York appeal will decide which side the Second Circuit lands on.
States aren’t waiting. Utah sued Kalshi last week, seeking a geofence that would block its users there and up to $61.2 million in fees. Ohio has given its licensed gaming operators until October 30 to cut ties with prediction market platforms. The CFTC is pushing back, suing New York, Arizona, Connecticut and Illinois for a ruling that event contracts fall under federal authority alone.
No hearing date has been reported in the Manhattan case. Kalshi could still try to move the petition to federal court, as it did with the attorney general’s lawsuit.