CME, Kalshi Executives Clash Over Prediction-Market Oversight

Kalshi is a CFTC-registered designated contract market that lets users trade event contracts tied to sports, elections and other outcomes. Its legal strategy rests on federal pre-emption: the company argues the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over its exchange, while states contend much of the activity is gambling subject to local licensing and consumer-protection laws. The outcome will determine whether prediction markets can operate under one national framework or face a state-by-state patchwork.

On Aug. 13, King County Superior Court Judge John McHale ordered Kalshi to block Washington users from most contracts, requiring initial IP and residency geofencing by Aug. 19 and a multi-source system by Sept. 2. Kalshi sought reconsideration on Aug. 20, citing Washington’s decision not to enforce equivalent restrictions against Crypto.com pending appeal. Separately, 44 state attorneys general challenged the CFTC’s 267-page proposed rule after comments closed July 27. The CFTC invoked emergency authority on Aug. 11 to keep Kalshi operating amid New York’s July 31 suit, which seeks more than $36 billion in damages.

Kalshi operates a CFTC-designated contract market where users trade event contracts tied to sports, politics and other outcomes. The company says those products are derivatives governed by the federal Commodity Exchange Act, while New York treats its sports contracts as unlicensed gambling subject to state safeguards, taxes and age limits. The dispute has become a direct test of whether the Commodity Futures Trading Commission’s asserted exclusive jurisdiction over national derivatives markets preempts state gambling enforcement.

On Aug. 11, 2026, the CFTC invoked emergency authority after KalshiEX notified it of a “market emergency,” ordering the exchange to keep operating in line with the Commodity Exchange Act’s Core Principles. New York Attorney General Letitia James had sued on July 31, seeking a temporary restraining order barring Kalshi from offering all event contracts nationwide and more than $36 billion in damages. The action marked the agency’s first use of such emergency powers since 1980 and sharply escalated the federal-state jurisdictional fight.

The dispute between the Commodity Futures Trading Commission and prediction-market platform Kalshi stems from a Michigan court’s June 29, 2026, finding that Kalshi’s contracts allegedly constituted illegal gambling and its order to cancel completed trades. The case centers on a clash between federal regulatory authority and state law. The CFTC warned that canceling trades would seriously undermine market confidence and contractual certainty.

In the latest development, the CFTC said on July 14, 2026, U.S. Eastern Time that it had invoked emergency powers to stop Kalshi from proceeding with plans to cancel trades by Michigan users, ordering the platform to settle them under normal procedures. Meanwhile, the Michigan court extended its injunction against the platform’s sports-event contracts and ordered Kalshi to implement geofencing to block users in the state by August 12, 2026, or face daily fines.

Prediction markets turn events such as sports outcomes into tradable event contracts. KalshiEX LLC is a designated contract market approved by the U.S. Commodity Futures Trading Commission. The dispute centers on whether the Commodity Exchange Act preempts state gambling laws. The CFTC argues that derivatives markets require uniform federal oversight, while New Mexico considers the contracts a form of online sports betting requiring a state license. The ruling could shape the boundaries of state enforcement and platform operations.

New Mexico’s attorney general sued Kalshi on June 4, 2026, alleging that the platform operated without a state license and allowed users aged 18 and older to participate, including people below the state’s minimum gambling age of 21. The case was moved to federal court on June 8. The CFTC filed a separate lawsuit against the state government on June 12, seeking confirmation of federal preemption and preliminary and permanent injunctions. New Mexico is the eighth state targeted by a CFTC lawsuit over enforcement, and the complaint did not seek a specific amount in damages.

Kalshi structures outcomes in sports, elections and other areas as event contracts and operates as a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC). Minnesota, however, considers the activity gambling subject to state law. The dispute centers on whether the Commodity Exchange Act grants exclusive federal jurisdiction that preempts the state ban under the U.S. Constitution’s Supremacy Clause. The outcome could reshape regulatory boundaries nationwide.

Governor Tim Walz signed SF 4760 on May 18, 2026, before replacing it with SF 3432 on May 26. Effective August 1, the law makes operating, facilitating or advertising prediction markets a felony. The CFTC sued on May 19 and sought an injunction, followed by Kalshi on May 27. Kalshi also argued that the advertising restrictions violate the First Amendment. The litigation is expected to continue through appeals and could ultimately be decided by the U.S. Supreme Court.

Kalshi is a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC) that offers event contracts tied to outcomes including sports results. The Ohio Casino Control Commission considers such products to be sports betting that requires a license, prompting Kalshi to sue in October 2025. The dispute centers on whether federal derivatives regulation preempts state intervention, and its outcome could also affect platforms such as Polymarket.

On May 12, 2026, the CFTC filed an amicus brief with the U.S. Court of Appeals for the Sixth Circuit supporting Kalshi’s challenge to a federal district court’s March 2026 denial of an injunction. The CFTC called Ohio’s action a “jurisdictional overreach” and asked the court to affirm its exclusive authority over event contracts offered on designated contract markets. The filing marks the agency’s second intervention in a similar case, following its support for Crypto.com in the Ninth Circuit in February.

Event contracts allow investors to wager money on outcomes such as elections or sporting events. Kalshi, Robinhood and others argue that the contracts are derivatives under the Commodity Exchange Act and fall under the exclusive jurisdiction of the US Commodity Futures Trading Commission. States consider them unlicensed gambling. How courts draw the regulatory boundary will determine whether the platforms can operate across state lines.

On April 2, 2026, the CFTC filed separate lawsuits against Arizona, Connecticut and Illinois, asking the courts to declare that federal law preempts state gambling laws and to permanently bar state enforcement. It did not seek monetary damages. All three states had issued cease-and-desist orders, while Arizona also filed criminal charges. A federal court stayed Arizona’s prosecution on April 10.