BREAKING: CFTC Files Restraining Order as New York AG Sues Kalshi Prediction Market

The legal fight between the Commodity Futures Trading Commission (CFTC) and New York over the regulation of prediction markets like Kalshi saw a dramatic escalation early Friday. The CFTC has filed for a restraining order to block New York actions against registered prediction market platforms, while New York Attorney General Letitia James has sued Kalshi.

CFTC Files Emergency Restraining Order to Block New York Lawsuit on Kalshi

The CFTC and the United States filed an emergency motion for a temporary restraining order in their existing federal lawsuit against New York, according to a filing in the U.S. District Court for the Southern District of New York (SDNY).

The federal regulator seeks to immediately block the New York Attorney General from pursuing criminal or civil enforcement actions against Kalshi or any other CFTC-registered entity.

The CFTC argued that the court should grant the temporary restraining order, primarily due to a pending motion for preliminary injunction. The CFTC claimed the Commodity Exchange Act grants the agency jurisdiction over prediction markets and preempts state gambling regulations.

This is described by legal observers as a “Hail Mary” filing to get ahead of the NY AG’s state court action. The CFTC argues that federal law under the Commodity Exchange Act grants it exclusive jurisdiction over prediction markets like Kalshi and preempts state gambling regulations.

The commodities regulator has previously sued multiple states on similar grounds and maintained that allowing state interference risks undermining the integrity of federally regulated derivatives markets.

New York Attorney General Letitia James Files Lawsuit

NY Attorney General Letitia James and Governor Kathy Hochul announced that New York filed a lawsuit against Kalshi in a state court. It accused the CFTC-registered Kalshi prediction market of running an illegal, unlicensed gambling business.

The lawsuit seeks a court order to stop Kalshi from operating as an unlicensed gambling business. Also, it seeks restitution, disgorgement, civil penalties, damages worth $36 billion, and preliminary and permanent injunctive relief.

Sports betting attorney Daniel Wallach revealed that NY AG Letitia James also filed a motion for a temporary restraining order, with several former CFTC attorneys. These attorneys allegedly retaliated against for pursuing enforcement action against Gemini Titan while at the Commission.

The filing comes after the 2nd Circuit appeals court denied Kalshi’s request for temporary administrative relief pending review by a three-judge panel. Moreover, Judge Analisa Torres earlier denied Kalshi’s preliminary injunction request against New York over gambling laws.