Share 
President Donald Trump’s administration is taking unprecedented steps to shield prediction markets from state regulation.
Prediction market operators say they run financial exchanges offering event contracts and fall under the exclusive jurisdiction of the US Commodity Futures Trading Commission, a federal agency. Many state authorities counter that the platforms are running illegal gambling operations and exploiting federal law to dodge state taxes and regulations.
Federal regulator sues nine states over jurisdiction
The CFTC has sued New York and eight other states as it fights to preserve exclusive authority over prediction markets. CFTC Chairman Mike Selig is a Trump appointee.
The president weighed in on the dispute in May, writing on Truth Social that “it is critically important that the CFTC’s exclusive authority over prediction markets is maintained, and that they will thrive.”
States haven’t backed down. New York Attorney General Letitia James, joined by Gov. Kathy Hochul‘s administration, sued Kalshi on July 31 in Manhattan state court, alleging the company is running an unlicensed gambling operation and evading the 51% tax that New York levies on sports betting platforms.
The lawsuit seeks a permanent injunction, forfeiture of Kalshi’s New York profits, restitution for consumers and penalties that could total roughly $36 billion — three times the company’s alleged gains, according to CNBC.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said in a statement announcing the suit. “By ignoring our laws, Kalshi is running an illegal operation and harming New Yorkers in the process.”
“My goal is to make sure that anyone operating in the state of New York follows our laws. It is that simple,” Hochul added.
Kalshi, which lets users trade on outcomes ranging from ballgames to elections, denies it operates a gambling platform. Bobby DeNault, the company’s head of regulation, argues that Kalshi users are trading event contracts on a federally regulated financial exchange — not placing sports bets.
“Just because two things touch on sports does not make both the same,” DeNault told Spectrum News/NY1. “We’ll go to court and make sure that the rule of law prevails.”
State and federal courts now fighting over jurisdiction
The case’s procedural fight is already underway. A federal judge had earlier denied Kalshi’s request for an injunction pending appeal before New York filed suit, according to NY1. Kalshi has since moved to transfer the state case to federal court, while New York has moved to send it back to state court.
Kalshi also asked the CFTC to intervene, and on Aug. 11 the commission used its emergency authority to order Kalshi to keep operating in New York despite the state’s suit, according to CoinDesk.
The move marked an escalation in the standoff between the federal commodities regulator and state regulators, who argue that sports-related prediction markets amount to gambling and fall outside CFTC authority.
The CFTC maintains it has jurisdiction over all prediction markets because they involve federally regulated swaps.
White House denies any conflict of interest exists
Republicans have historically championed states’ rights, making the administration’s push for federal preemption unusual. Attorney Dan Wallach, who founded the country’s first sports betting law firm, said the explanation is straightforward: the Trump family’s financial stake in the industry.
Trump’s son, Donald Trump Jr., serves as an adviser to Polymarket, where his venture capital firm, 1789 Capital, is a major investor. He is also an adviser to Kalshi, where equity shares once valued at $300,000 are now worth more than $20 million, according to Wallach.
“On the third day of his current presidential term, Kalshi submitted a self-certification announcing its intention to offer and list sports event contracts on its exchanges involving the outcomes of games,” Wallach said.
He added that the CFTC’s recent actions break from historic federal policy, noting the agency had previously barred exchanges from listing contracts tied to gaming outcomes.
“This is, in many ways, one of the most brazen self-enrichment schemes in US presidential history,” Wallach said.
White House Principal Deputy Press Secretary Anna Kelly rejected the criticism: “This is the same, tired narrative that Democrats have pushed against President Trump, his family and his administration for a decade. President Trump only acts in the best interests of the American public — which is why they overwhelmingly reelected him to this office, despite years of lies and false accusations against him and his businesses from the fake news media. There are no conflicts of interest.”
