- The CFTC has intervened in New York’s legal challenge to Kalshi, using emergency authority to require the prediction market to continue operating.
- The dispute centres on whether Kalshi’s event contracts fall under federal derivatives oversight or New York’s gambling laws, with both sides advancing competing jurisdictional claims.
- The New York case is part of a wider conflict involving multiple states, particularly over sports-related prediction markets and the extent of the CFTC’s authority.
Kalshi has been ordered to keep operating after the Commodity Futures Trading Commission (CFTC) exercised emergency powers following a lawsuit by New York Attorney General Letitia James that seeks to halt the prediction market’s activities in the state. The intervention marks another escalation in a dispute over whether federally regulated prediction markets can be governed by state gambling laws.
Kalshi alerted the CFTC to what it described as an imminent market emergency if New York obtained a temporary restraining order, prompting the federal regulator to require continued operations under the Commodity Exchange Act’s Coreg Principles. The CFTC said its action was intended to support orderly markets, resilience and the functioning of derivatives trading.
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State and Federal Powers Put to the Test
New York brought its case against Kalshi on 31 July after a federal judge rejected the company’s attempt to prevent the state from bringing enforcement proceedings. James alleges that Kalshi’s prediction contracts constitute gambling under New York law and claims the company has not secured the required state gaming licence or paid relevant taxes. The state is seeking a temporary restraining order and other remedies, including restitution, disgorgement and civil penalties of at least US$36 billion (AU$51.12 billion).
CFTC Chair Michael Selig maintains that Congress did not intend derivatives exchanges to face a patchwork of state gaming regulations. He argues that prediction markets are financial exchanges operating across state lines rather than businesses subject to individual state gambling regimes.
The confrontation extends beyond New York, with the CFTC pursuing cases involving multiple states as authorities continue to dispute federal and state jurisdiction over prediction markets, particularly sports contracts.
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