The U.S. Commodity Futures Trading Commission announced an emergency order Tuesday directing prediction market operator Kalshi to continue operating in New York, directly challenging a lawsuit filed by New York State Attorney General Letitia James seeking to shut down the platform.
The conflict marks an escalation in a jurisdictional dispute between federal and state regulators over whether prediction markets qualify as federally regulated derivatives exchanges or state-licensed gambling platforms. New York filed suit July 31, alleging Kalshi violated state gambling laws by offering sports prediction markets without a license from the New York State Gaming Commission.
CFTC Chairman Mike Selig framed the order as a defense of federal regulatory authority. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws,” Selig said in a statement. He added that New York “intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings.”
Selig’s position rests on the CFTC’s view that prediction markets operate as interstate financial instruments beyond state jurisdiction. “These are financial exchanges that offer financial instruments and operate across state lines. They match the bid from a resident of one state with the offer of a resident from another state and submit the trade to a clearinghouse that backstops the transactions of customers throughout the country. New York has no business regulating these interstate financial markets,” Selig said.
New York’s complaint centers on taxation and licensing requirements. The state’s press release asserted that “Kalshi has failed to obtain a license from the New York State Gaming Commission, sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do.”
Litigation Status
A federal judge previously ruled against Kalshi’s bid to block New York from filing the lawsuit. Kalshi subsequently moved to transfer the case to federal court, while New York moved to transfer it back to state court. Both motions await a judge’s ruling.
The CFTC has previously sued New York over its stance on prediction markets. In another jurisdiction, Kalshi unwound trades after a Michigan court order, according to a statement by Robert Denault, Kalshi’s head of enforcement.
The emergency order represents the CFTC’s assertion of exclusive federal jurisdiction over all prediction markets, which the agency classifies as swaps under federal derivatives law. States including New York argue that prediction markets function as gambling platforms subject to state licensing and tax requirements, not federal derivatives regulation.
