TLDR New York is suing Kalshi for $36 billion over claims that its sports contracts are illegal sportsbooks. The CFTC used emergency authority to shield Kalshi from state legal action just one day after a Saratoga panel discussed the issue. Kalshi had offered a 6% tax proposal before the lawsuit, but New York officials say it does not match the 51% tax rate paid by licensed sportsbooks. Legal experts believe the U.S. Supreme Court will likely settle the dispute over prediction markets. Horse racing could benefit from prediction markets through side bets on jockeys and awards, rather than race outcomes.
Prediction markets are facing a wave of legal challenges across the country. The fight centers on whether platforms like Kalshi and Polymarket are operating as unlicensed sportsbooks.
New York is one of the states pushing back hardest. The state is seeking $36 billion from Kalshi in an active lawsuit.
The topic came up during a panel at the Racing and Gaming Conference in Saratoga Springs last week. Industry lawyers and state officials shared different views on how to handle the issue.
One day after that panel, the Commodity Futures Trading Commission stepped in. Chairman Michael Selig used the agency’s emergency authority to protect Kalshi from New York’s legal action.
Should States Tax Prediction Markets?
Katie Neer, a lawyer who once served as an aide to former Governor Andrew Cuomo, said several states have already moved to tax or regulate these platforms. She said New York has held off because officials do not want to appear to legitimize the activity while the lawsuit is pending.
Neer disagrees with that approach. She said the state should start collecting tax revenue instead of waiting.
Before the lawsuit was filed, Kalshi proposed a 6% tax on trades. The company said this