New York Seizes on Massachusetts Injunction to Pressure Kalshi
New York gaming regulators moved quickly on Tuesday to cite a Massachusetts court ruling against Kalshi, as state authorities escalate legal pressure on sports prediction market platforms.
The Massachusetts ruling marks the first time a state authority has obtained a court order requiring a prediction market platform to halt sports-related offerings pending litigation. Up until now, prediction market operators like Kalshi have repeatedly persuaded courts to let them keep operating while legal cases are pending.
The Massachusetts Superior Court judge found the state was “likely to succeed on the merits” of its claim that Kalshi’s sports markets constitute unlicensed sports wagering. The judge issued an order barring the platform from offering those contracts to Massachusetts residents without proper licensure.
The New York State Gaming Commission (NYSGC) was quick off the mark after the announcement of the Massachusetts victory. It filed the Massachusetts decision as supplemental authority in its case against Kalshi. The NYSGC used supplemental authority to ask the court to consider a ruling in another court that supports its position.
Gaming lawyer Daniel Wallach highlighted the timeliness of the Massachusetts ruling. He noted that a decision in the Southern District of New York on Kalshi’s motion for a preliminary injunction is “imminent.”
A Run of Wins for State Authorities
The NYSGC originally issued a cease-and-desist order to Kalshi in October. The regulator requested that the platform stop operating in the state. It argued that Kalshi had breached state laws by offering an illegal, unlicensed sports betting product.
Kalshi responded a few days later with a lawsuit against the NYSGC. It claimed it’s subject to federal oversight, not state rules. Kalshi has used this argument repeatedly across multiple states.
State authorities are now getting smarter with their strategies. The Nevada Gaming Control Board went on the offensive by filing a civil enforcement action against Polymarket on Jan. 16. This proactive move forces Polymarket to prove that federal law fully preempts state law.
The Massachusetts injunction marked a first-of-its-kind action. Wallach pointed out that prediction markets have suffered six consecutive adverse outcomes in their cases against state governments.
A Footnote in Tennessee
The third major development in the prediction market on Tuesday came from Tennessee. In its opposition to Kalshi’s motion for a preliminary injunction, Tennessee regulators cited the Massachusetts order in a footnote. They argued the court should deny relief because Kalshi approached the court with “unclean hands.”
The Tennessee Sports Wagering Council sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com on Jan. 9, prompting Kalshi to file a lawsuit shortly after.
Only a few days later, on Jan. 12, a federal judge issued a temporary restraining order (TRO) blocking Tennessee regulators from enforcing the cease-and-desist. The judge found that Kalshi was likely to succeed on the merits.
That leaves Tennessee’s procedural posture more complicated than those of Massachusetts and New York.
With Massachusetts now setting judicial precedent and New York and Tennessee quickly incorporating that ruling into their own cases, the balance of power is shifting back toward state regulators.
As more courts address the merits of whether sports event contracts constitute gambling under state law, prediction market operators may find it increasingly challenging to secure preliminary injunctions that allow them to continue operating while those disputes play out.
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