During the Indian Gaming Association's webcast, 'The New Normal', legal experts criticized the Commodity Futures Trading Commission (CFTC) for instructing Kalshi to disregard court orders. The CFTC has recently exercised its emergency authority, most notably with two significant directives affecting the prediction market platform.
On July 14, the CFTC ordered Kalshi to fulfill open trades in Michigan, directly opposing a court ruling that required the company to block the state and refund specific sports bets. More recently, on August 11, the agency issued an emergency directive for Kalshi to continue its operations in New York, despite an official state order to halt activities and a pending $36 billion lawsuit against the company from Attorney General Letitia James.
In the webcast, IGA Conference Chair Victor Rocha and Executive Director Jason Giles accused the CFTC and Kalshi of openly flouting court authority. Giles remarked on the incongruity of such actions, saying, "What is going on with that? I mean, can you imagine a tribal gaming operation doing something like that, with the NIGC [National Indian Gaming Commission] running interference?"
Joseph Webster, a managing partner at Hobbs, Straus, Dean & Walker, LLP, echoed these concerns, expressing astonishment at the aggressive actions taken by the CFTC. "The CFTC has put out these orders and notices suggesting that even if a court decision directs a company to stop taking these particular contracts, they're required to continue to do so anyway," he said. "I will say I've never seen anything like that."
Scott Crowell, of the Crowell Law Office Tribal Advocacy Group, suggested that CFTC Chairman Michael Selig is setting a troubling precedent by encouraging registrants to violate court rulings. He stated, "When you already have a federal court saying, 'Kalshi, you do not have permission to continue to operate outside of the parameters of New York law,' that literally is a federal agency telling a regulated entity to defy a federal court order. In my 50 years of being a lawyer, I’ve never seen blatant contemptuous disregard by a federal agency. That’s new."
The CFTC's involvement in litigation has been increasing and has extended to several states, including Arizona, Connecticut, Illinois, Kentucky, Minnesota, New York, and Wisconsin. Webster noted the extraordinary pace of legal challenges, saying there have been nearly 80 cases initiated in various courts during the past 18 months.
Crowell pointed out that the CFTC's push for federal regulation of sports contract markets seems to contradict its previous inaction from 2018 to present. He argued that it suggests a shift in congressional intent regarding the agency’s role in overseeing the gaming industry, emphasizing that Selig’s current stance appears to create a regulatory structure for these markets. "They’re really doing is being a cheerleader for the prediction market operators," he concluded.
Panelists believe the dispute is likely headed to the Supreme Court. Webster mentioned that New Jersey is expected to file a petition for a writ of certiorari following a recent unfavorable ruling in the U.S. Court of Appeals for the Third Circuit. "We don’t know if the Supreme Court will take it. I think there are reasons to think that they might," he remarked, expressing confidence that the highest court will ultimately address the issue, whether through this case or others emerging through the legal system.
While appeals have already been heard in courts like the Sixth Circuit, none have released opinions yet. Observers are noting a possible shift in momentum against prediction market platforms. "We've seen the questions that the judges have, and what that translates to is a real sea change in terms of the results in the courts," Webster said, indicating that the trend seems to favor states, tribes, and away from prediction markets.
