CFTC Orders Kalshi to Keep Operating in New York

The U.S. Commodity Futures Trading Commission (CFTC) has ordered prediction market operator Kalshi to continue operating in New York, escalating a growing legal battle between federal regulators and the state over the future of prediction markets.

The CFTC invoked its emergency authority after Kalshi requested federal assistance following a lawsuit filed by New York Attorney General Letitia James and the state in late July. New York claims Kalshi is offering sports prediction markets without the required state gambling license.

The dispute highlights a broader conflict over whether prediction markets should be regulated as financial derivatives by the federal government or treated as gambling platforms under state law.

CFTC Chairman Mike Selig defended the federal regulator's position, arguing that Congress did not intend for derivatives exchanges to be governed by different state gaming laws. He said Kalshi's event contracts function as interstate financial products because trades can connect participants in different states and are processed through federally regulated clearing infrastructure.

New York takes a different view. State officials argue that Kalshi's sports-related contracts effectively constitute gambling and should be subject to the same licensing and taxation requirements imposed on casinos and mobile sports betting operators. The state says gambling-related tax revenue supports public schools, youth sports programs, and problem-gambling services.

The legal dispute is still unfolding. Kalshi has sought to move New York's lawsuit to federal court, while the state has asked for the case to be returned to state court. A judge has yet to rule on those competing requests.

The CFTC has previously taken action in support of Kalshi in Michigan, where state authorities also challenged the company's prediction markets. That case further demonstrates the widening regulatory conflict surrounding sports prediction markets and federally regulated event contracts.

For Kalshi, the latest CFTC order provides temporary protection in New York, but the underlying question remains unresolved: whether prediction markets belong primarily under federal derivatives regulation or state gambling laws.