The CFTC ordered Kalshi to continue operating in New York despite the state's lawsuit
The U.S. Commodity Futures Trading Commission (CFTC) exercised its emergency powers and ordered the prediction market platform Kalshi to continue operating in New York State. The regulator stated that it acted in response to an “emergency market situation” and to ensure market stability, according to Ars Technica.
The CFTC’s action was prompted by a lawsuit filed on July 31 by New York Attorney General Letitia James. In the lawsuit, the state asks the court to permanently bar Kalshi from operating what the plaintiffs allege is an illegal, unlicensed gambling business in New York. The lawsuit also seeks reimbursement for users who placed bets, as well as financial penalties.
In a joint statement, New York Governor Kathy Gokul and James noted that the lawsuit is based on the state’s position that: Kalshi’s prediction markets meet the legal definition of gambling, as the outcomes of events are uncertain, independent of the participant, or based on chance. According to the state, Kalshi did not obtain a license from the New York Gaming Commission and evaded the tax obligations that licensed casinos and mobile sports betting operators are required to fulfill.
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CFTC Chairman Michael Selig stated that the federal commission has exclusive authority to regulate such platforms under the Commodity Exchange Act. According to him, Kalshi and similar services are financial exchanges operating across state lines, matching orders from participants in different states and transmitting transactions to a clearinghouse.
Earlier, a federal judge denied Kalshi’s motion to bar New York from applying local gambling laws to the platform. The court noted that federal law does not preempt all state actions related to regulated contract markets. Kalshi appealed the decision to the U.S. Court of Appeals for the Second Circuit and is seeking to have James’s lawsuit transferred from state court to federal court.
