Kalshi is pushing to keep New York’s lawsuit against the prediction-market operator in federal court, saying the state’s case cannot be resolved without answering key questions about federal commodities and gambling law.
In an August 21 filing in the U.S. District Court for the Southern District of New York, Kalshi challenged Attorney General Letitia James’ effort to send the dispute back to state court.
“This case should not be remanded,” Kalshi said in the filing.
New York sued Kalshi on July 31, accusing the company of operating an illegal gambling business without a state gaming license. The case cites the federal Wire Act alongside New York constitutional, criminal, racing and wagering laws. Officials want to stop Kalshi’s operations in the state and are seeking restitution, disgorgement, civil penalties and accounting information.
Kalshi moved the lawsuit into federal court that same day.
The Commodity Futures Trading Commission (CFTC) granted Kalshi designated contract market status in 2020. Kalshi maintains that its contracts are federally regulated derivatives and fall under the CFTC’s exclusive jurisdiction when traded on its market.
Kalshi says federal commodities law overrides New York gambling claims
Sports contracts joined Kalshi’s offerings in January 2025. When those products were self-certified, the CFTC asked Kalshi for information showing they complied with federal law, according to the filing. Kalshi responded, and the regulator took no further action.
“The State’s claims necessarily raise disputed and substantial federal law issues,” Kalshi said.
Kalshi points to three reasons the federal court should retain the case. Its first argument focuses partly on New York’s Wire Act claim. Deciding it, Kalshi says, means determining whether event contracts qualify as betting or wagering and examining the Wire Act alongside the Unlawful Internet Gambling Enforcement Act and Commodity Exchange Act.
The company says the same federal questions underpin New York’s state gambling allegations because a court must decide whether federal law permits the contracts as swaps regulated by the CFTC.
Kalshi also invokes the federal officer removal statute and argues that its CFTC designation gives it a federally derived property right. Separately, it says New York cannot sidestep federal jurisdiction by excluding the CFTC as a party.
The jurisdiction battle follows regulatory clashes. On August 11, the CFTC issued an emergency order directing Kalshi to continue normal operations while the litigation proceeds, after warning that New York’s requested restrictions could disrupt derivatives markets. New York has also pursued a separate Gaming Commission investigation and previously ordered Kalshi to cease operations.
“The federal issue—whether Kalshi’s event contracts are unlawful gambling or authorized swap transactions traded on a federal exchange subject to the CFTC’s exclusive jurisdiction—is ‘actually disputed,’” the company said.
Kalshi now wants the federal judge to reject New York’s remand request and keep the dispute in federal court.
Featured image: Canva / Kalshi
