CFTC Steps In as New York Sues to Shut Down Kalshi

The Commodity Futures Trading Commission (CFTC) has sued to stop New York’s attempt to halt the operations of prediction market Kalshi, which was announced Friday (July 31).

“Rather than seek reasoned answers from the courts, [New York Attorney General] Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide,” CFTC Chairman Michael S. Selig said in a Friday post on X. “The [CFTC] has already sued to stop this and will continue to defend its jurisdiction.”

James and New York Governor Kathy Hochul announced in a Friday press release that New York sued Kalshi for running what they described as an “illegal, unlicensed gambling operation.”

The state’s lawsuit seeks a court order stopping Kalshi from operating as an unlicensed gambling business in New York and requiring the company to pay fines equal to three times the gains it made through illegal actions, forfeit all illegal gains and pay restitution to consumer who were harmed, according to the release.

The lawsuit alleges that Kalshi’s prediction markets meet the legal definition of gambling, that the company failed to obtain a license from the New York State Gaming Commission and that the company’s prediction markets are available to users between the ages of 18 and 20, while New York law requires a person to be at least 21 to participate in mobile sports betting, per the release.

Hochul said in the release that “Kalshi has chosen to ignore New York’s gambling laws” and that “New York is taking action to stop this illegal behavior and bring Kalshi into compliance.”

James said in the release: “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”

Reached by PYMNTS, Kalshi said in an emailed statement that states can’t shut down a federally licensed exchange. Kalshi is regulated by the CFTC as a Designated Contract Market, according to the company’s website.

“It’s sad to see this type of political theater from the leadership in our own state,” Kalshi Head of Communications Elisabeth Diana said in the statement. “States can’t just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore. We love New York, we love New Yorkers, and New Yorkers love our product.”

In another, separate court battle between Kalshi and the state of Ohio, the CFTC filed an amicus brief reaffirming its exclusive jurisdiction over prediction markets. The regulator said in a May press release that the filing outlines the regulatory scheme designed by Congress and details how that scheme preempts state laws as applied to markets regulated by the CFTC.