New York Seeks Kalshi Records Over Ads and Market Makers

New York is seeking a court order requiring Kalshi to turn over internal records about how it markets its platform and who takes the other side of customers’ trades.

Attorney General Letitia James’ office filed the petition on November 2, saying Kalshi had not supplied documents demanded in a September 25 subpoena. The state wants the company ordered to respond within 10 days.

The investigation concerns possible misleading advertising by Kalshi and people promoting it. It adds another dispute over consumer protection to the broader fight over whether the company’s sports contracts fall under state gambling laws.

What Consumers Are Being Told

The attorney general is examining promotions that present Kalshi winnings as a source of income, including claims about covering rent or replacing a job. The requested material includes payments to promoters, their activity on the exchange and the company’s rules for advertising.

Another focus is Kalshi’s description of an exchange without a “house.” The petition questions how that messaging fits with the involvement of Kalshi Trading, an affiliated market maker, and other firms approved to supply liquidity.

The state alleges that those firms can be the counterparties to customers’ combo trades. It is seeking records about proprietary trading, market-making agreements and incentive schemes to determine whether the advertising leaves consumers with a misleading impression of the business.

The petition seeks access to evidence. It does not establish that Kalshi’s advertising was deceptive.

A Dispute Over the Investigation

Kalshi asked a federal judge on October 30 to prevent enforcement of the subpoena. It argues that New York is attempting to obtain material connected to an existing lawsuit through a separate investigative process.

The attorney general’s office says the demands concern a distinct investigation into potential fraud and false advertising.

New York’s July lawsuit accused Kalshi of operating an unlicensed gambling business, including making its products available to users under the state’s sports-betting age of 21. Kalshi maintains that its contracts are federally regulated financial products outside state gambling regulators’ authority.

The Gaming Commission is also pursuing its own subpoena-enforcement action for records about sports contracts, users under 21, advertising and company ownership. That proceeding is separate from the advertising petition.

Sporttrade Prepares Its Exchange

Federal approvals are meanwhile opening the way for another sports event-contract operator. The Commodity Futures Trading Commission designated Sporttrade DCM LLC as a contract market on October 30, following the October 16 registration of Sporttrade DCO LLC as a clearing organization.

The clearing registration permits fully collateralized futures, options on futures and swaps. Sporttrade says its exchange will support direct users and broker-routed trading, and that its clearinghouse can provide services to other exchanges.

The company plans a phased introduction of its exchange and clearing operations, starting with selected trading-flow and liquidity partners.