Hassan Maishera
TL;DR
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The CFTC has ordered prediction-market operator Kalshi to continue serving New York customers.
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The federal regulator invoked its emergency authority after New York sued Kalshi over its sports-event contracts.
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New York argues that Kalshi offers unlicensed gambling products and avoids taxes imposed on regulated sportsbooks.
The US Commodity Futures Trading Commission has ordered Kalshi to continue operating in New York as the prediction-market platform faces a state lawsuit seeking to halt its services.
The CFTC invoked its “emergency authority” after Kalshi requested assistance following a lawsuit filed by New York Attorney General Letitia James in late July, according to a Tuesday announcement.
The intervention escalates an ongoing dispute over whether prediction markets—particularly those involving sporting events—fall under federal derivatives regulation or state gambling laws.
CFTC Claims Exclusive Authority Over Prediction Markets
State regulators have argued that sports prediction contracts function as gambling products and must comply with local licensing, taxation and consumer-protection rules.
The CFTC takes a different view. It maintains that prediction-market contracts are federally regulated derivatives or swaps traded through designated exchanges under its supervision.
CFTC Chair Mike Selig reiterated the agency’s position, arguing that Congress did not intend for derivatives platforms to face different gaming laws in every state.
“These are financial exchanges that offer financial instruments and operate across state lines,” Selig said.
He added that prediction markets can match bids and offers from residents of different states before sending trades to a clearinghouse serving customers across the country.
“New York has no business regulating these interstate financial markets,” Selig said.
The CFTC has previously taken legal action against New York over the state’s approach to prediction markets.
New York Accuses Kalshi of Offering Unlicensed Gambling
New York sued Kalshi on July 31 after a federal judge rejected the company’s attempt to prevent the state from taking enforcement action.
The lawsuit alleges that Kalshi violates New York gambling laws by offering prediction contracts tied to sporting events without obtaining authorization from the New York State Gaming Commission.
According to a statement from the state, Kalshi has avoided licensing obligations and taxes paid by regulated casinos and mobile sports-betting platforms.
New York emphasized that gambling-tax revenue supports public schools, youth sports programs, problem-gambling education and treatment services.
The state’s position focuses on the practical function of the contracts. Although Kalshi classifies them as derivatives, New York argues that contracts allowing users to wager on sporting outcomes operate like conventional sports betting.
At the center of the dispute is whether federal regulation preempts state gaming law.
Kalshi operates as a federally regulated derivatives exchange under CFTC oversight. The company argues that this status allows it to offer event contracts nationally without obtaining separate gambling licenses in each state.
New York contends that federal commodities regulation does not give Kalshi permission to bypass state laws governing sports wagering.
The legal outcome could affect the entire US prediction-market industry. A ruling favoring Kalshi could limit states’ ability to regulate federally approved event contracts, while a victory for New York could require operators to obtain state licenses or restrict access in certain jurisdictions.
Court Considers Where the Lawsuit Should Proceed
Kalshi has moved to transfer New York’s lawsuit to federal court, where questions involving federal commodities law and regulatory preemption may receive greater emphasis.
New York has asked for the case to be returned to state court. Both requests are awaiting a judge’s decision.
The CFTC’s emergency order allows Kalshi to continue operating in New York during the jurisdictional dispute. However, it does not resolve the underlying question of whether the platform’s sports contracts violate state gambling laws.
The New York action follows a similar conflict involving Kalshi and Michigan. The CFTC previously intervened after a court sided with Michigan and ordered Kalshi to unwind certain transactions.
However, Kalshi Head of Enforcement Robert Denault later said the platform had already reversed the affected trades as required by the Michigan court.
The disputes in New York and Michigan highlight growing friction as prediction markets expand into sports and compete more directly with licensed betting companies.
The courts’ eventual rulings could determine whether prediction markets operate primarily under one federal framework or must also comply with a state-by-state collection of gambling laws.
