CFTC Allows Kalshi to Maintain Prediction Markets in New York Amid State Lawsuit

CFTC Supports Kalshi's Operations in New York Amid Legal Challenges

The U.S. Commodity Futures Trading Commission (CFTC) has granted Kalshi, a prediction market operator, permission to continue its activities in New York despite a lawsuit from the state aimed at blocking its operations.

Exercising its "emergency authority," the CFTC stepped in after Kalshi requested help following legal action initiated by New York State Attorney General Letitia James at the end of July. This development highlights the ongoing clash between federal and state regulators regarding prediction markets, particularly those tied to sports betting.

While state authorities argue that these markets constitute gambling platforms that violate local laws, the CFTC contends that it holds jurisdiction over all prediction markets, categorizing them as federally regulated swaps. CFTC Chairman Mike Selig emphasized this stance, asserting, "Congress did not intend for derivatives exchanges to be governed by a patchwork of state gaming laws." He criticized New York's attempts to regulate these markets, stating that they are financial exchanges operating across state lines, and that New York lacks the authority to impose its regulations on them.

New York's lawsuit, filed on July 31, accused Kalshi of violating state gambling laws by offering sports prediction markets without a license from the New York State Gaming Commission. The state claims that this oversight allows Kalshi to evade taxes that would otherwise fund public schools and youth sports programs.

Kalshi is seeking to move the case to federal court while New York is advocating for it to remain in state court. Both motions are awaiting a judicial ruling. In a previous incident, the CFTC also intervened on Kalshi's behalf in Michigan, where a state court had sided with local regulators.