AGA backs New York in fight over prediction markets

The American Gaming Association has filed a memorandum backing New York in its fight with the Commodity Futures Trading Commission over prediction markets. The group opposed the CFTC’s request for a preliminary injunction, and Judge Lorna G. Schofield allowed the filing without deciding whether the association may formally intervene.

The case turns on a basic but far-reaching question: whether sports-event contracts traded on federally regulated exchanges belong only under the CFTC’s umbrella, or whether states may still regulate them as gambling products. New York and the AGA argue that letting those contracts operate outside the state gambling regime would weaken licensing, consumer-protection and tax rules.

As reported on Sept. 2, New Jersey asked the Supreme Court to decide who regulates sports contracts traded on Kalshi.

In its filing, the AGA said contracts on whether a team wins, covers a point spread or finishes above a scoring total are sports bets in substance, even when they trade on a federally registered exchange. The group pointed to the Ninth Circuit’s Aug. 28 decision in KalshiEX LLC v. Assad as support for New York’s authority to treat such contracts as gambling.

The filing also leaned on Kalshi’s own advertising, product comparisons and sports-volume reporting to argue that the product looks more like a sportsbook wager than a conventional financial hedge. It said state-licensed sportsbooks must pay taxes and follow New York rules on licensing, age limits, responsible-gaming controls and market restrictions, while prediction exchanges can offer similar sports outcomes without operating under that system.

The AGA filing said New York mobile sports betting generated about $1.32 billion in state tax revenue in 2025, most of it directed to education, though the court has not adopted that estimate.

The dispute grew out of a clash that began in April, when New York’s gaming commission ordered Kalshi to stop offering sports-event contracts without a state license and the CFTC and the United States sued New York on April 24. The CFTC has said the Commodity Exchange Act gives it exclusive authority over swaps and futures traded on federally regulated exchanges, while New York says state gambling laws still apply.

The ruling on the preliminary-injunction motion would be temporary, not a final answer on whether sports-event contracts are swaps or whether federal law pre-empts New York gambling law. Judge Schofield is scheduled to hear arguments in the Southern District of New York at 11 a.m. ET on Sept. 14.