The Commodity Futures Trading Commission invoked its “emergency authority” after New York’s lawsuit against prediction-market company Kalshi, escalating the federal government’s fight with states over sports betting.
On Tuesday, the CFTC announced that it ordered KalshiEX to keep operating under federal derivatives law after Kalshi notified the agency of a “market emergency.”
The claimed emergency stems from New York Attorney General Letitia James’ July 31 lawsuit against the company.
NY Seeks to Shut Down Kalshi
New York is seeking an injunction that could prohibit Kalshi from offering its event contracts nationwide, along with more than $36 billion in penalties and other financial relief.
James alleges Kalshi operates an illegal, unlicensed gambling business. Kalshi maintains that its so-called sports event contracts are federally regulated financial derivatives rather than state-regulated wagers.
In response, the CFTC has backed Kalshi on the jurisdictional issue.
CFTC Chairman Michael Selig said New York was trying to place event contracts behind an “iron curtain of state gaming laws.” He argued that Congress intended federally regulated derivatives exchanges to operate under a uniform national framework rather than different gambling laws in each state.
Kalshi counts Donald Trump Jr. as an equity stakeholder and advisor.
Trend Continues
The move on Tuesday represents another major intervention by the federal regulator.
In July, the CFTC used its emergency authority after a Michigan court ordered Kalshi to cancel previously executed trades involving Michigan residents.
The agency ordered Kalshi to fulfill those trades, saying state interference could undermine the national derivatives market.
The CFTC is now fighting states across the country over prediction markets. It says it has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin.
The central dispute in these cases could reach the Supreme Court. The high court may eventually rule on whether products that closely resemble sports bets can avoid state gambling laws.
