CFTC Faces Criticism After Directing Kalshi to Continue New York Operations Despite Court Order
TL;DR — The CFTC exercised its emergency authority on August 11 ordering Kalshi to continue trading in New York after New York Attorney General Letitia James sued on July 31 seeking more than $36 billion in damages. Webster and Crowell questioned the agency during the IGA New Normal webinar. Webster said the federal agency doesn’t get to usurp that judicial function.
SCCG Take — Conflicting federal and state directives increase compliance exposure for prediction market operators. Clearer jurisdictional boundaries are required before further market entry or licensing moves.
The Commodity Futures Trading Commission issued an emergency order on August 11 directing prediction market operator Kalshi to continue trading in New York, despite a state court action to halt event contracts. New York Attorney General Letitia James filed suit on July 31 seeking a restraining order and more than $36 billion in damages. Tribal gaming attorneys sharply questioned the agency’s move during an Indian Gaming Association webinar, according to CDC Gaming.
Tribal Attorneys Question CFTC Authority
Joe Webster, a partner with Hobbs Strauss, asked what the agency was doing and compared the situation to a tribal gaming operation with the National Indian Gaming Commission running interference. Webster said the CFTC orders suggest that even if a court directs a company to stop taking bets on its prediction platform, the company is required to continue anyway. “The federal agency doesn’t get to usurp that judicial function,” Webster said. He noted compliance questions are live in multiple states.
Scott Crowell, an attorney with Crowell Law Office Tribal Advocacy Group, addressed the New York matter where Kalshi lost its bid for a preliminary injunction. Crowell said the CFTC emergency order amounts to telling the company not to abide by state law orders. “In my 50 years of being a lawyer, I’ve never seen such blatant contemptuous disregard by a federal agency,” Crowell said.
Conflicts Across States and Courts
The CFTC has filed federal lawsuits against at least nine states, including New York, to block enforcement against federally regulated platforms. In Arizona, U.S. District Judge Michael Liburdi granted a preliminary injunction after consolidation of cases, ruling that federal law preempts state gambling laws for derivatives exchanges regulated by the CFTC. In Nevada, the Nevada Gaming Control Board seeks a $120,000 per-day fine after a judge ordered Kalshi to stop offering sports, election, and entertainment event contracts by August 12. The parties await a Ninth Circuit ruling.
These cases show federal regulators and state courts issuing directly opposing instructions to the same operators. Regulators and licensed entities will need to track how the preemption arguments resolve before committing further exposure in contested jurisdictions.
Reporting: CDC Gaming
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
Federal-state collision on prediction markets is creating unworkable compliance traps and massive legal exposure for operators.
We've navigated tribal, state, and federal jurisdictional minefields for three decades. When a federal agency tells a platform to ignore state courts — while nine states sue and fines hit $120,000 per day — operators face existential compliance risk. This isn't regulatory clarity; it's a war zone.
- CFTC emergency order directs Kalshi to keep trading in New York despite state court action and $36B AG lawsuit
- Tribal gaming attorneys call move 'blatant contemptuous disregard' — unprecedented federal usurpation of judicial authority
- Nine states face CFTC federal lawsuits; Nevada seeks $120K/day fines; conflicting court orders trap operators
SCCG angle: SCCG works with state regulators, tribal authorities, and federal compliance specialists across every jurisdiction in play. When operators get caught between contradictory orders, we broker introductions to the right legal and government relations counsel and map real-world compliance paths before exposure spirals. We've done it in 545 partnerships.
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