CFTC Sues New York as 38 AGs Back Kalshi Gambling Ban

The U.S. Commodities Futures Trading Commission filed a lawsuit against New York state officials on Friday, the same day that 38 state attorneys general, including New York AG Letitia James, filed an amicus brief with Massachusetts’ Supreme Judicial Court urging the state to uphold a preliminary injunction against Kalshi’s sports event contracts. The dual actions represent an escalation in the state-federal conflict over prediction market regulation.

Massachusetts Coalition Backs Gambling Ban

New York Attorney General Letitia James joined a bipartisan coalition of 37 other attorneys general from states and the District of Columbia in filing the amicus brief with the Supreme Judicial Court of Massachusetts. The brief supports a January ruling that Kalshi cannot offer sports event contracts to Massachusetts residents without a Gaming Commission license.

“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 that Kalshi’s claim that its contracts are “swaps” subject to exclusive CFTC oversight under the Dodd-Frank Act misreads the 2010 statute. The attorneys general contend that Dodd-Frank was designed to address financial instruments behind the 2008 financial crisis, not to legalize sports gambling nationwide at a time when federal law still prohibited states from authorizing it.

CFTC Files Federal Lawsuit

Hours later, the CFTC filed a complaint in the U.S. District Court for the Southern District of New York, naming Attorney General 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 this week against Coinbase and Gemini, 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 Legal Landscape

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 office 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.”

Court outcomes have been mixed 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, Illinois, Tennessee, and New Jersey all signed onto Friday’s brief despite their varying legal outcomes—some having won cases, others lost, and some yet to litigate.

Recent Enforcement Actions

The Friday actions cap a week of cascading enforcement activity. New York Attorney General 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. TD Cowen analyst Jaret Seiberg has stated that 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.