New York's legal action aimed to prevent Kalshi from running sports-related prediction markets.
By Nikhilesh De|Edited by Jesse Hamilton35 min ago2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on U.S. Commodity Futures Trading Commission Chairman Mike Selig (Jesse Hamilton/CoinDesk)The U.S. Commodity Futures Trading Commission (CFTC) has mandated that Kalshi, a prediction market operator, continue its operations in New York despite a lawsuit filed by the state aimed at halting its activities.
Utilizing its "emergency authority," the CFTC intervened after Kalshi sought assistance following a lawsuit from New York State Attorney General Letitia James, which was initiated at the end of July, as stated in a press release from Tuesday.
This situation underscores the ongoing conflict between federal and state regulators concerning prediction markets. While states contend that such markets, particularly those related to sports, qualify as gambling platforms that violate their regulations, the CFTC asserts its jurisdiction over all prediction markets due to their nature as federally regulated swaps.
In a statement on Tuesday, CFTC Chairman Mike Selig reaffirmed this position, arguing, "Congress did not intend for derivatives exchanges to be governed by a patchwork of state gaming laws."
He further criticized New York's approach, stating, "New York aims to suffocate event contract derivatives under its stringent state gaming laws before the courts can render final decisions. These are financial exchanges that provide financial instruments and operate across state lines. They connect bids from residents of different states and process trades through a clearinghouse that supports transactions nationwide. New York has no authority to regulate these interstate financial markets."
Previously, the CFTC took legal action against New York regarding its regulations on prediction markets.
On July 31, New York filed its lawsuit against Kalshi after a federal judge denied Kalshi's request to prevent the state from pursuing legal action. The state claimed that Kalshi was breaching its gambling laws by offering sports prediction markets.
According to a press release from New York, "Kalshi has not secured a license from the New York State Gaming Commission, thereby avoiding its duty to pay taxes like licensed casinos and mobile sports betting operators. This tax revenue from gambling regulation funds public schools, youth sports programs, and initiatives for gambling education and treatment."
Kalshi has sought to relocate the case to federal court, while New York has pushed to return it. Both motions are pending a judicial decision.
Earlier, the CFTC had intervened to assist Kalshi in maintaining its operations in Michigan after a judge sided with the state. However, Kalshi's Head of Enforcement, Robert Denault, noted on social media that the company had already "unwound the trades" mandated by the Michigan court.