Kalshi has moved New York’s lawsuit accusing the company of operating an unlicensed gambling platform into federal court, a step that paused the state’s immediate bid for a preliminary injunction in state court. The lawsuit seeks at least $36 billion in damages, penalties and related relief, but the claims remain allegations and no final judgment has been entered.
The dispute escalated on Aug. 3 as Kalshi CEO Tarek Mansour publicly defended the company’s prediction market model on CNBC, arguing that the case is aimed at a federally regulated derivatives exchange rather than a traditional sportsbook. He compared Kalshi’s role to Nasdaq, saying the platform matches traders and collects transaction fees.
State court request put on hold after removal
New York’s verified petition alleges that Kalshi repeatedly violated state gambling laws by offering event contracts without a license from the New York State Gaming Commission. The state is seeking a permanent injunction, an accounting of customer activity, restitution, disgorgement and civil penalties, including $100,000 for each alleged unauthorized sports wagering offer.
About eight hours after the filing, Kalshi removed the case to federal court. That procedural move led New York Supreme Court Justice Melissa A. Crane to treat the state’s request for immediate preliminary relief as moot because the case was no longer before her. According to court records shared by gaming law attorney Daniel Wallach, the order did not address the substance of New York’s allegations.
The effect for now is limited to forum and timing. If a federal judge later sends the case back to state court, New York could renew its injunction request there.
Kalshi argues its contracts are financial products
Mansour rejected the state’s description of Kalshi as an unlicensed sportsbook. In his CNBC interview, he said users trade against one another while Kalshi operates the exchange infrastructure and earns fees, adding that regulators could "copy and paste that lawsuit and file it against Nasdaq."
That argument goes to the center of Kalshi’s position: that its event contracts are financial instruments traded on a venue regulated by the Commodity Futures Trading Commission, not ordinary bets. Kalshi is registered with the CFTC as a designated contract market, and its contracts generally let customers take opposing views on whether an event will occur.
Mansour also framed the company’s legal fights as similar to earlier clashes involving Uber and Airbnb, calling the New York action a response from entrenched gaming interests. That characterization is Kalshi’s, not a court finding.
New York says the platform still fits its gambling laws
The attorney general’s office argues that Kalshi’s products meet New York’s definition of gambling because customers risk money on future events outside their control. The petition points to contracts tied to professional and college sports, elections and entertainment outcomes, and says the company charges fees connected to those trades.
New York also claims that people between 18 and 20 can access the platform even though the minimum age for mobile sports betting in the state is 21. The state says licensed operators must comply with consumer protection rules and tax obligations that Kalshi does not meet. Kalshi disputes New York’s authority to impose those requirements on a federally registered exchange.
The filing also references a reported $22 billion company valuation and annualized transaction volume of $178 billion. Those numbers appear in the state’s petition as reported figures, not court findings. Mansour separately claimed that New Yorkers had earned more than $200 million on Kalshi in 2026 and that a proposal from the company could generate almost $10 billion in state tax revenue over five years, though he did not publish supporting calculations during the interview.
A broader fight over federal and state authority
The latest removal arrives after an earlier loss for Kalshi in New York. On July 7, U.S. District Judge Analisa Torres declined to stop the New York State Gaming Commission from enforcing state gambling laws against Kalshi’s sports contracts at the preliminary stage, finding the company had not shown that federal commodities law displaced state rules. Kalshi appealed, but its emergency requests were also denied.
Federal and state authorities have taken different positions. In an April federal complaint, the CFTC argued that Congress gave the agency exclusive authority over swaps and other contracts traded on registered derivatives exchanges. New York, by contrast, says states retain their traditional power to police gambling within their borders.
Courts elsewhere have not reached one uniform early view. A Washington judge blocked Kalshi sports contracts after concluding state gambling laws could apply, while a federal judge in Minnesota temporarily blocked that state’s prediction market ban.
What the next court step will decide
The immediate issue in the newly removed New York case is not whether Kalshi’s products are lawful, but whether federal jurisdiction exists and where the dispute should proceed. The assigned federal judge must decide whether the case stays in federal court or is remanded to state court.
If the matter returns to state court, New York can revive its request for preliminary injunctive relief. If it remains in federal court, the next phase will unfold alongside other litigation over the reach of CFTC authority and whether federal oversight preempts state gambling enforcement in this area.
Source: crypto.news