CFTC Sues New York as 38 AGs Back Kalshi Prediction Market Ban

New York Attorney General Letitia James joined a bipartisan coalition of 37 other attorneys general and the District of Columbia on Friday in urging Massachusetts’ top court to uphold a preliminary injunction against prediction market platform Kalshi, while the U.S. Commodity Futures Trading Commission simultaneously filed a federal lawsuit against New York state officials to block state enforcement against CFTC-registered exchanges. The escalating dispute reflects a fundamental disagreement over whether prediction markets fall under exclusive federal jurisdiction or remain subject to state gambling laws.

Coalition Brief and Massachusetts Case

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. 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.

“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,” AG James said in a statement. The coalition argues that Kalshi’s claim that its contracts are “swaps” subject to exclusive CFTC oversight under the Dodd-Frank Act 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 Federal Lawsuit

Hours after the coalition brief was filed, the CFTC filed a complaint in the U.S. District Court for the Southern District of New York, naming AG James, Governor Kathy Hochul, the New York State Gaming Commission, Executive Director Robert Williams, and six commissioners as defendants. The agency is 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 filed against Coinbase and Gemini this week, as examples of state 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.

Broader Enforcement Pattern

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, 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.”

The Friday actions capped a week of cascading enforcement. AG 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.

Mixed Court Outcomes

Court outcomes have been split across jurisdictions. The U.S. Court of Appeals for the Third Circuit sided with Kalshi over New Jersey earlier this month in a 2-1 ruling, 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 brief, as did Tennessee and New Jersey—states with divergent court outcomes. The breadth of the signatories underscores how broadly state attorneys general view the preemption argument as a threat to traditional state authority over gambling.

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 TD Cowen analyst Jaret Seiberg, 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.