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7h ago

New York Sues Kalshi and Seeks Customer Records as Case Moves to Federal Court

The state is asking a Manhattan court to force an accounting and large penalties, and Kalshi’s removal raises a broader fight over whether the CFTC or states set rules for prediction markets.

Santos was ordered to pay $35,000 after the CFTC found he had manipulated Kalshi contracts tied to his State of the Union attendance.
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Overview

  • New York filed a verified petition on July 31 seeking a permanent injunction, customer names, itemized wagers and losses, restitution and civil penalties that state officials say could exceed $36 billion.
  • Kalshi removed the suit to federal court hours after the state filing, a procedural move that temporarily paused New York’s immediate bid for a state judge to block in‑state activity.
  • The dispute now centers on federal preemption: the CFTC and Kalshi say event contracts are federally regulated derivatives while many states argue they are unlicensed gambling subject to local rules.
  • Recent court rulings have split; a July 27 federal judge in Minnesota enjoined that state from enforcing a prediction‑market ban for CFTC‑registered exchanges, while other federal and state judges have allowed state challenges to proceed.
  • The fight carries practical stakes for consumers and state revenue because outcomes could determine age limits, tax collection, account blocks and how regulators police insider trading after the CFTC’s July 31 enforcement against George Santos.