CFTC Intervenes to Keep Prediction Market Operating in New York Amid State Lawsuit
The Commodity Futures Trading Commission (CFTC) has invoked emergency authority to prevent New York from shutting down the prediction market platform Kalshi, just as the company experiences a significant surge in revenue. The federal regulator’s intervention comes days after New York Attorney General Letitia James filed a lawsuit seeking to block Kalshi’s sports-related contracts. Kalshi had formally requested the CFTC’s intervention.
The implications of this dispute are substantial. According to a report by The Information, Kalshi has reached an annualized revenue run rate exceeding $4 billion, a doubling of its figures from just two months prior. The company is reportedly raising capital at a valuation of $40 billion, positioning it as one of the fastest-growing entities in the financial sector. This rapid expansion coincides with state-level efforts to curb its operations.
New York contends that sports prediction markets constitute gambling, circumventing state licensing requirements and tax obligations. The state asserts that these revenues are crucial for funding schools and programs aimed at addressing problem gambling. The CFTC, however, maintains that these contracts are federally regulated swaps. CFTC Chairman Mike Selig, appointed by the Trump administration and known for his crypto-friendly stance, argued that “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws.” He accused New York of attempting to stifle these contracts through its “iron curtain of state gaming laws” and asserted that these are interstate financial markets which New York has no jurisdiction to regulate.
This marks the third instance of the CFTC intervening on behalf of Kalshi, following a similar action in Michigan. The CFTC has also initiated its own lawsuit against New York. However, the underlying legal cases remain unresolved, and a judge has previously ruled against Kalshi’s attempt to halt the state’s lawsuit. Meanwhile, Kalshi continues to report escalating revenues and secure higher valuations.
The central question at stake is whether a federal license grants these platforms the ability to operate nationwide, or if individual state regulators will retain veto power. The CFTC has decisively sided with the former, and with Kalshi’s revenue doubling, both parties have significant financial interests riding on the outcome.
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