Catenaa, Sunday, April 26, 2025- The Commodity Futures Trading Commission sued New York on Friday as 38 attorneys general backed Kalshi in a separate court fight, escalating a national dispute over who controls prediction markets and whether such contracts fall under federal financial law or state gambling rules.
The case reflects a widening split between federal regulators and state authorities. At the center is whether event-based contracts, including sports-linked bets, should be treated as derivatives or gambling. States argue these products mirror betting activity and require local licensing. Federal regulators maintain they fall within a national framework.
In Massachusetts, a coalition of attorneys general urged the court to uphold restrictions blocking Kalshi from offering sports contracts without a gaming license. They argue that allowing such activity could bypass long-standing state oversight of gambling. Data cited in filings shows heavy user participation, with billions in monthly wagers and sports contracts dominating activity.
Hours later, the CFTC filed suit in federal court seeking to halt enforcement actions by New York. The agency argues that federal law grants it sole authority over event contracts listed on registered exchanges. State leaders responded by defending their right to regulate gambling within their jurisdictions.
Legal outcomes remain mixed. Federal courts in some states have sided with Kalshi, while others upheld state restrictions. Analysts expect the dispute to move toward the US Supreme Court, with a final decision likely years away.
The conflict comes amid rising scrutiny of crypto-linked platforms offering new financial products that blur lines between trading and betting.
A prolonged legal battle between US regulators and states over prediction markets is set to shape control of crypto-linked financial products and could reach the Supreme Court.
