● Covered by 3 sources · 4 reportsMedium impact3 negative1 neutral
New York Sues Kalshi for Illegal Gambling, CFTC Orders Continued Operation
Key points
- New York sued Kalshi for operating an unlicensed gambling business.
- The lawsuit seeks to block Kalshi in New York and demands customer restitution.
- The CFTC ordered Kalshi to continue operating, citing federal authority.
- Washington state previously issued an injunction against Kalshi for unlicensed wagers.
- The dispute highlights conflict between state and federal regulation of prediction markets.
New York Files Lawsuit Against Kalshi
New York Attorney General Letitia James has filed a lawsuit against Kalshi, a prediction market platform, alleging it is running an "illegal gambling operation." The lawsuit claims Kalshi violates state laws by accepting wagers without a license from the New York State Gaming Commission. The Office of the Attorney General's investigation found that Kalshi exposes New York residents, including those under 21, to financial risk.
The state seeks a court order to permanently block Kalshi from operating in New York and demands restitution for customers who placed bets on the platform, along with financial penalties. Kalshi is headquartered in New York.
Federal Intervention by CFTC
In response to New York's lawsuit, the Commodity Futures Trading Commission (CFTC) announced it exercised its emergency authority, ordering Kalshi to continue operating in the state. The CFTC stated it acted to ensure market stability and ordered the exchange to operate in accordance with the Commodity Exchange Act’s Core Principles. CFTC Chairman Michael Selig indicated that Congress did not intend for derivatives exchanges to be regulated by state gaming laws.
The CFTC's action follows a request from Kalshi and highlights a conflict between state and federal regulatory bodies regarding the classification and oversight of prediction markets.
Prior State-Level Legal Challenges
New York's lawsuit is not the first legal challenge against Kalshi. Multiple states, including Nevada, New Mexico, Arizona, and Washington, have previously sued the platform. In Washington, a state judge issued a preliminary injunction ordering Kalshi to stop offering sports gambling and other wagers within the state.
The Washington court found Kalshi was operating without a license and that its advertisements claiming "legal betting" were likely misleading to consumers. The injunction required Kalshi to implement geofencing to restrict access for Washington residents.
Defining Prediction Markets
The core of the legal dispute revolves around whether prediction markets like Kalshi constitute gambling. New York's lawsuit alleges that Kalshi meets the legal definition of gambling because it allows people to bet on uncertain events not controlled by the bettor. The state also points to Kalshi's operation without a license, failure to pay taxes like traditional betting apps, and offering services to individuals under 21 as violations.
The CFTC, however, views prediction markets as derivatives and asserts its authority as the regulator in charge of these markets, disagreeing with the states' classification of them as gambling.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
A Washington state judge issued a preliminary injunction against Kalshi, ordering the prediction market to stop offering sports gambling and various other wagers within the state. This action follows a lawsuit by the state of Washington, which found Kalshi was operating without a license and misleading consumers about the legality of its services.
The Commodity Futures Trading Commission (CFTC) used its emergency authority to order prediction market Kalshi to continue operating in New York, overriding a lawsuit filed by the New York Attorney General alleging illegal gambling. This action highlights a conflict between federal and state regulatory bodies regarding the classification and oversight of prediction markets.
New York has filed a lawsuit against Kalshi, an online prediction market platform, alleging it operates an illegal gambling business by allowing users to bet on uncertain events without proper licensing. This legal action follows similar challenges in other states and highlights a conflict with the Commodity Futures Trading Commission (CFTC) regarding the classification of prediction markets.
New York Attorney General Letitia James has filed a lawsuit against Kalshi, accusing the prediction market platform of running an illegal gambling operation by accepting wagers without a state license. The lawsuit seeks to block Kalshi from operating in New York and demands restitution for customers, raising questions about state versus federal jurisdiction over prediction markets.