CFTC Sues New York Over Kalshi Market; 38 AGs Back Case

The U.S. Commodity Futures Trading Commission this week sued the State of New York in federal court in Manhattan, asking a judge to block state enforcement actions that it contends improperly target Kalshi’s prediction market.

The agency’s complaint says New York officials have taken steps that conflict with the Commodity Exchange Act and federal oversight of futures and event contracts. The CFTC seeks a declaratory judgment that the state enforcement is unlawful and an injunction to prevent further interference with Kalshi’s operations.

Separately, 38 state attorneys general filed an amicus brief supporting Massachusetts in a related lawsuit against New York’s actions. The brief frames the dispute as a federal preemption issue, arguing that a single state cannot override federal rules governing commodity markets and exchanges that operate across state lines.

Massachusetts sued New York after the state moved to restrict Kalshi’s operations. Kalshi is a trading platform approved by the CFTC to list certain event-based contracts that pay out based on outcomes of discrete events such as economic data releases, weather events or political results.

New York officials have asserted their actions aim to protect residents and enforce state law on gambling and consumer protection. The CFTC and the coalition of attorneys general argue that allowing one state to bar trading in products the agency classifies as federally regulated would create inconsistent rules for national markets and interfere with federal authority.

Court filings describe the specific relief each side seeks. The CFTC asks the court to prevent New York from applying state law to halt trading or to revoke permissions Kalshi needs to serve customers. The Massachusetts-led case requests similar relief to block state enforcement steps that would conflict with federal regulation.

Legal counsel and market participants say the litigation could affect other exchanges that list event-style contracts and new derivatives. Courts will consider competing arguments over federal preemption, the scope of the Commodity Exchange Act and the limits of state authority.

The dispute follows months of regulatory and political debate over whether certain event contracts should be available to retail traders in particular states. The next procedural steps are court hearings on the motions for relief.