CFTC Sues New York as 38 AGs Back Kalshi Crackdown

The regulatory battle over prediction markets intensified on Friday as New York Attorney General Letitia James joined a bipartisan coalition of 37 other attorneys general in filing an amicus brief to Massachusetts’ Supreme Judicial Court, while the U.S. Commodity Futures Trading Commission simultaneously sued New York to block state enforcement against CFTC-registered exchanges. The dual actions underscore the escalating state-federal clash over jurisdiction and regulatory authority in the prediction markets sector.

Attorneys General Coalition Defends State Authority

The amicus brief, filed in the Supreme Judicial Court of Massachusetts, urges the court to affirm a January ruling prohibiting Kalshi from offering sports event contracts to Massachusetts residents without a state Gaming Commission license. The coalition comprises attorneys general from 37 states and the District of Columbia, spanning the political spectrum.

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 that Kalshi’s characterization of its contracts as “swaps” subject to exclusive CFTC oversight under the Dodd-Frank Act misinterprets the 2010 statute. The AGs contend that Dodd-Frank was designed to address financial instruments underlying the 2008 crisis, not to legalize sports gambling nationwide at a time when federal law still prohibited states from authorizing such activity.

“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.

CFTC Files Preemption Lawsuit

Hours after the AGs filed their brief, the CFTC filed a complaint in the U.S. District Court for the Southern District of New York, naming James, Governor Kathy Hochul, the New York State Gaming Commission, Executive Director Robert Williams, and six commissioners as defendants.

The agency seeks a declaratory judgment that federal law grants it exclusive authority over event contracts, plus a permanent injunction blocking New York from enforcing what it characterizes as preempted gambling laws against CFTC-registered entities. CFTC Chairman Michael Selig stated: “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.” The agency cited an October cease-and-desist letter Kalshi received from New York gaming regulators, alongside civil suits filed this week against Coinbase and Gemini, as examples of state conduct encroaching 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 Federal Litigation

The CFTC’s New York lawsuit follows nearly identical suits the agency filed against Arizona, Connecticut, and Illinois on April 2. Since taking leadership of the CFTC, Chairman Selig has expanded the agency’s jurisdictional posture, 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.”

Notably, Arizona, Connecticut, and Illinois—three of the states the CFTC is currently suing—signed onto Friday’s amicus brief, as did Tennessee and New Jersey. This broad coalition underscores how state attorneys general view the federal preemption argument as a threat to traditional state authority over gambling, regardless of prior legal outcomes in their respective jurisdictions.

Mixed Court Outcomes Across States

Court rulings 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 Kalshi a preliminary injunction in February. However, state and federal judges in Nevada, Maryland, Ohio, and Massachusetts have ruled against the platform.

TD Cowen analyst Jaret Seiberg has stated that states still appear to hold the stronger legal position overall, with the dispute likely heading to the Supreme Court and a resolution potentially not arriving until 2028.

Broader Enforcement Escalation

Friday’s actions capped a week of cascading enforcement activity. 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 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.

FAQ

What is the core legal dispute between the CFTC and state attorneys general?

The CFTC argues that prediction market contracts fall under exclusive federal jurisdiction as “swaps” regulated under the Dodd-Frank Act. State attorneys general contend that these contracts are illegal gambling subject to state gambling laws, and that Dodd-Frank was designed to regulate financial instruments from the 2008 crisis, not to legalize sports gambling nationwide.

How many attorneys general have signed onto the amicus brief supporting state authority?

According to the source, 38 attorneys general in total (New York AG Letitia James plus 37 others) have joined the amicus brief filed in Massachusetts’ Supreme Judicial Court, representing 37 states and the District of Columbia.

What have been the court outcomes so far?

Court rulings are mixed. The U.S. Court of Appeals for the Third Circuit ruled in Kalshi’s favor over New Jersey in a 2-1 decision, and a Tennessee federal judge granted Kalshi a preliminary injunction in February. However, judges in Nevada, Maryland, Ohio, and Massachusetts have ruled against Kalshi.