Key facts
- The CFTC is seeking to block New York's lawsuit against prediction market operator Kalshi.
- New York AG Letitia James accuses Kalshi of operating an illegal, unlicensed gambling business.
- New York is seeking at least $36 billion in damages, triple Kalshi's earnings, and penalties.
- The CFTC argues federal law grants it exclusive jurisdiction over prediction markets, preempting state regulations.
- Kalshi argues it is federally licensed and regulated, and states have no authority to govern it.
- This action follows similar lawsuits filed by New York against Coinbase and Gemini.
The Commodity Futures Trading Commission (CFTC) has intervened in a lawsuit filed by New York Attorney General Letitia James against prediction market platform Kalshi, asserting federal preemption over the industry. New York officials are seeking to halt Kalshi's operations, alleging it is an illegal, unlicensed gambling business and demanding forfeiture of profits and substantial penalties.
In her lawsuit, filed in state Supreme Court in Manhattan, James stated that prediction markets like Kalshi are gambling platforms that violate state laws, harm New Yorkers, and fail to obtain necessary licenses or pay taxes. Her office is requesting Kalshi forfeit all illegal gains, pay restitution to harmed consumers, and pay fines equal to three times the company's profits. This action follows similar lawsuits filed by New York against rival prediction market operators Coinbase and Gemini in April.
Kalshi, a New York-based company, disputes the state's claims, with spokesperson Elisabeth Diana stating that states cannot shut down a federally licensed exchange. Kalshi argues that prediction markets function differently from gambling operations, operating more like stock markets where consumers trade against each other and the platform takes only a fee. They also contend that federal law grants the CFTC exclusive jurisdiction to regulate such transactions.
The CFTC, under a Trump administration appointee, has previously declared its intent to protect its exclusive jurisdiction over prediction markets. However, states argue that the majority of business on these platforms is sports betting, which they are empowered to regulate. This regulatory battle is unfolding across multiple states, with a federal judge recently blocking Minnesota's ban on prediction markets, a setback for states attempting to outlaw or regulate the industry.