CFTC Sues New York as 38 AGs Back Kalshi Injunction

On Friday, the U.S. Commodity Futures Trading Commission (CFTC) sued New York state, naming Attorney General Letitia James, Governor Kathy Hochul, the New York State Gaming Commission, Executive Director Robert Williams, and six commissioners as defendants, according to CFTC press release 9218-26. The same day, James joined a bipartisan coalition of 37 other attorneys general in filing an amicus brief with Massachusetts’ Supreme Judicial Court urging the court to uphold a preliminary injunction against prediction market platform Kalshi.

Massachusetts Amicus Brief and AG Coalition

The amicus brief, filed in the Supreme Judicial Court of Massachusetts, asks the court to affirm a January ruling that Kalshi cannot offer sports event contracts to in-state residents without a Massachusetts Gaming Commission license. The signatories span the political spectrum and include attorneys general from 37 states and the District of Columbia.

“Kalshi’s event contracts for sports are just illegal gambling by another name, and they should play by the same rules as every other licensed gambling platform,” James said in a statement.

According to the brief, Kalshi users wagered more than $1 billion every month on the platform in 2025, with sports betting accounting for roughly 90% of that volume in certain months. The coalition argues Kalshi’s contention that its contracts are “swaps” subject to exclusive CFTC oversight under Dodd-Frank misreads the 2010 statute, which the attorneys general say was crafted to address the financial instruments behind the 2008 crisis, not to legalize sports gambling nationwide at a time when federal law still prohibited states from authorizing it.

CFTC Legal Action

The CFTC filed its complaint in the U.S. District Court for the Southern District of New York, seeking a declaratory judgment that federal law grants it exclusive authority over event contracts, plus a permanent injunction blocking the state from enforcing what it calls preempted gambling laws against CFTC-registered entities.

“New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges,” CFTC Chairman Michael Selig said in a statement. The agency cited an October cease-and-desist letter Kalshi received from New York gaming regulators, alongside civil suits against Coinbase and Gemini filed earlier in the week, as conduct intruding on federal jurisdiction.

James and Hochul, both Democrats, issued a joint statement Friday evening accusing the Trump administration of “prioritizing big corporations over consumers and New Yorkers’ best interests” and pledging to defend the state’s gambling laws in court.

Pattern of CFTC Litigation

The CFTC’s New York complaint follows nearly identical suits the agency filed against Arizona, Connecticut, and Illinois on April 2. CFTC Chairman Selig has steadily expanded the agency’s jurisdictional posture since taking over the agency, where he sits as the only current commissioner, withdrawing a Biden-era proposal that would have banned political event contracts and warning state regulators in February that the agency would “no longer sit idly by.”

Mixed Legal Outcomes

Court outcomes have been split across jurisdictions. The U.S. Court of Appeals for the Third Circuit sided with Kalshi over New Jersey in a 2-1 ruling earlier this month, and a Tennessee federal judge granted the company a preliminary injunction in February. State and federal judges in Nevada, Maryland, Ohio, and Massachusetts, however, have ruled against the platform.

Arizona, Connecticut, and Illinois—the three states the CFTC is currently suing—all signed onto Friday’s amicus brief, as did Tennessee and New Jersey, where federal courts have ruled in Kalshi’s favor. The breadth of the signatories, drawn from states that have won, lost, or have yet to fight in court, underscores how broadly state attorneys general view the preemption argument as a threat to traditional state authority over gambling.

Escalating Enforcement Actions

The Friday actions cap a week of cascading enforcement. James sued Coinbase and Gemini on Tuesday, seeking a minimum of $2.2 billion and $1.2 billion, respectively. Wisconsin’s attorney general filed civil suits Thursday against Kalshi, Polymarket, Robinhood, Crypto.com, and Coinbase, alleging their sports event contracts violate the state’s commercial gambling ban.

Kalshi was last valued at roughly $22 billion following a $1 billion raise disclosed in March, and recorded over $10 billion in trading volume so far this month, according to The Block’s data dashboard. TD Cowen analyst Jaret Seiberg has said states still appear to hold the stronger legal position, with the dispute likely heading to the Supreme Court and a resolution potentially not arriving until 2028.

FAQ

Q: What is the legal dispute between the CFTC and state attorneys general over prediction markets?

A: The CFTC argues it has exclusive federal authority over event contracts offered by CFTC-registered exchanges under Dodd-Frank. State attorneys general counter that prediction market platforms like Kalshi are offering illegal gambling that should be regulated under state gambling laws, which predate federal CFTC authority. The coalition argues Dodd-Frank was designed to address financial instruments from the 2008 crisis, not to legalize sports gambling.

Q: How have courts ruled so far on prediction market cases?

A: Court outcomes have been mixed. The U.S. Court of Appeals for the Third Circuit sided with Kalshi over New Jersey in a 2-1 ruling, and a Tennessee federal judge granted Kalshi a preliminary injunction in February. However, state and federal judges in Nevada, Maryland, Ohio, and Massachusetts have ruled against the platform, and Massachusetts’ Supreme Judicial Court issued a preliminary injunction against Kalshi in January.

Q: Why did 38 attorneys general file an amicus brief in the Massachusetts case?

A: The coalition of 38 attorneys general (37 states plus the District of Columbia) filed the brief to urge Massachusetts’ Supreme Judicial Court to uphold a preliminary injunction against Kalshi, arguing that prediction market platforms should be subject to the same licensing and regulatory requirements as other gambling platforms under state law.