New York sued prediction market platform Kalshi on Friday, seeking to shut down its operations in the state and pursue financial relief that gaming attorney Daniel Wallach estimates could total at least $36 billion.
That potential exposure exceeds the $22 billion valuation Kalshi received in its most recent funding round in May, turning a licensing dispute into a fight over the company’s survival.
Kalshi spokesperson Elisabeth Diana called the suit “political theater from the leadership in our own state.”
She said that states “can’t just shut down a federally licensed exchange” and that the action would drive New Yorkers offshore.
The petition, filed in Manhattan state court by Attorney General Letitia James and announced alongside Governor Kathy Hochul, alleges Kalshi operates without a state gaming license, sidesteps gambling taxes and lets users aged 18 to 20 trade despite New York’s 21-year minimum for mobile sports betting.
“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
The Feds Fired First
Less than an hour before New York filed, the Commodity Futures Trading Commission lodged an emergency motion in Manhattan federal court to block the state’s enforcement, warning that a single state could bring “entire federally regulated markets to the brink of destruction.”
Kalshi has been fighting New York in federal court since October.
A judge ruled in July that federal law does not shield its sports-event contracts from state gambling rules, and an appeals court declined to pause that ruling Wednesday, clearing the way for Friday’s suit.
Kalshi and Benzinga have an existing data collaboration agreement.
What It Means for DraftKings and Robinhood
DraftKings (NASDAQ:DKNG), which could benefit if New York forces a competing sports platform out of the market, fell 3.38% Thursday, with the stock heading into its Aug. 6 earnings report near 52-week lows.
Robinhood (NASDAQ:HOOD) fell 3.61% to $86.60 Thursday despite beating second-quarter profit expectations. The broker continues to offer some event contracts through Kalshi and has argued in its Washington state lawsuit that similar enforcement threatens its customers and prediction-market business.
James filed similar petitions in April against Coinbase (NASDAQ:COIN) and Gemini, meaning the Second Circuit panel’s ruling could impact the entire listed prediction market complex, not just Kalshi.
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