Court: Kalshi can't evade NY sports licensing law

The prediction market Kalshi cannot offer sports betting in New York without a state gaming license, a federal judge has ruled.

Kalshi — which offers betting on politics, weather and almost anything else — had sought to get around a state licensing requirement to offer sports betting in New York and had asked the U.S. District Court in Manhattan to throw out a "cease and desist" letter it received in October by the state Gaming Commission, which accused the company of operating an "unlicensed mobile sports wagering platform."

But Kalshi’s argument didn’t fly with federal Judge Analisa Torres, who, in a decision issued late Tuesday, sided with the Gaming Commission.

Torres rejected the claim that the federal Commodity Exchange Act preempts state law and prevents New York from blocking Kalshi from offering sports betting. She also rejected the idea that Kalshi’s sports betting was akin to commodities "swaps," which are federally regulated.

"Kalshi argues that the CEA expressly preempts New York gambling laws as applied to its sports-event contracts because [federal law] has ‘exclusive jurisdiction’ over ‘transactions involving swaps,’ including Kalshi’s sports-event contracts," Torres wrote in her decision.

However, a review of the CEA’s provisions and congressional actions shows "Congress did not intend to regulate so broadly as to exclude all state gambling laws from regulating transactions involving swaps," Torres wrote.

Further, "Kalshi has not shown that it is impossible to comply with both New York gambling laws and the CEA," the judge said. "Therefore, Kalshi has not demonstrated a likelihood of success on the merits that New York’s gambling laws are field preempted as applied to its sports-event contracts."

Torres noted Kalshi is involved in similar litigation in a number of states, and it has been granted preliminary injunctions in some instances.

State leaders hailed the decision.

Gov. Kathy Hochul and Attorney General Letitia James said in a joint statement: "New York’s gambling laws are designed to protect consumers. Kalshi tried to ignore them. Yesterday, they lost in court."

Kalshi didn’t comment Wednesday on the decision.

By Yancey Roy

yancey.roy@newsday.com@yanceyroy