Two gaming attorneys have criticized the Commodity Futures Trading Commission’s (CFTC) intervention in legal disputes involving prediction market operator Kalshi, arguing that the federal regulator’s actions have raised concerns over compliance with court orders.

During the Indian Gaming Association’s “The New Normal” webcast, attorneys Joseph Webster and Scott Crowell questioned the CFTC’s decision to issue emergency directives that allowed Kalshi to continue operating in jurisdictions where courts had ordered restrictions on the company’s event contracts.

The discussion followed the CFTC’s August 11 emergency order, issued after Kalshi notified the agency of a market emergency. The directive instructed the company to continue trading in New York under federal standards governing designated contract markets.

According to CDC Gaming, the move came after New York Attorney General Letitia James filed a lawsuit against Kalshi on July 31, seeking to stop the platform from offering event contracts in the state and requesting more than $36 billion in damages.

Attorneys Raise Concerns Over Federal Intervention

Webster, a partner at Hobbs Strauss, questioned the decision to direct a federally regulated company to continue operating after state court action.

“What is going on with that?” asked Joe Webster, a partner with Hobbs Strauss. “I mean, can you imagine a tribal gaming operation doing something like that with the (National Indian Gaming Commission) running interference?”

He said the situation raised broader questions about how companies should respond when courts issue orders restricting their activities.

“The CFTC has put out these orders. What (they’re) suggesting is that even if a court decision instructs or directs a company to stop taking these particular contracts, they’re required to continue to do so anyway,” Webster said Wednesday during the Indian Gaming Association’s (IGA) New Normal webinar.

Webster argued that courts hold responsibility for deciding whether operations comply with legal requirements and that federal agencies should not replace that judicial role.

Crowell Law Office Tribal Advocacy Group attorney Scott Crowell also criticized the CFTC’s involvement, describing the agency’s position as an unusual challenge to court authority.

“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,” he said. “In my 50 years of being a lawyer, I’ve never seen blatant contemptuous disregard by a federal agency. That’s new.”

Kalshi Faces Legal Battles Across Multiple States

The CFTC has become involved in several disputes involving prediction markets, including cases in Arizona, Connecticut, Illinois, Kentucky, Minnesota, New York, Rhode Island, Wisconsin and other jurisdictions.

The agency has filed lawsuits and participated in legal proceedings aimed at preventing states from enforcing gambling laws against federally regulated platforms such as Kalshi and Robinhood.

In Nevada, the Gaming Control Board has sought penalties after a court ordered Kalshi to stop offering sports, election and entertainment-related event contracts in the state. Regulators requested a $120,000 daily fine, claiming the company continued operating despite the order.

The Nevada Gaming Control Board stated that Kalshi had “profited enormously from its continued violations of Nevada law” and said investigators were able to purchase prohibited event contracts through mobile devices.

Kalshi’s legal team disputed those claims, arguing that investigators misrepresented their residency information and bypassed restrictions placed on the platform.

The Nevada dispute remains pending, with the state, Kalshi, Crypto.com and Robinhood Derivatives awaiting further developments from the Ninth Circuit Court of Appeals.

Webster said the number of ongoing cases involving prediction markets has created an unusual legal environment.

“It’s been an incredible 18 months or so of litigation,” said Webster. “I think at this point we’re up to something like 80 cases or so of various types in both federal court, state court … To me, it’s just unprecedented, the number of cases.”

Future Regulation Could Reach Supreme Court

The attorneys said the wider conflict over prediction markets could eventually require a decision from the U.S. Supreme Court.

Webster expects New Jersey to seek Supreme Court review following an April ruling from the U.S. Court of Appeals for the Third Circuit that went against the state.

“We don’t know if the Supreme Court will take it,” the attorney noted. “I think there’s reasons to think that they might. But whether it’s that case or one of these other cases that’s coming up through the courts, ultimately this is going to be resolved by the Supreme Court.”

The legal debate centers on whether event contracts offered by prediction markets should fall under federal derivatives regulation or state gambling laws.

Kalshi has argued that prediction markets operate differently from traditional sportsbooks and casinos. The company said exchanges rely on market structures rather than betting models and pointed to risk controls including trading breaks, self-exclusion options and deposit limits.

The company also argued that federally regulated exchanges require national oversight because fragmented state rules could affect market liquidity and operation.

Gaming attorneys, however, have raised concerns about whether prediction market operators would meet suitability standards if they later seek approval to enter state-regulated sports betting markets.

Webster said companies participating in prediction markets while assuming they could later obtain gaming licences face significant risks because regulators may consider their previous conduct during licensing reviews.