Kalshi faces fresh legal challenge over prediction markets in Montana

Montana prediction markets litigation adds new state front to Kalshi fight

Joe Webster was on a webinar Wednesday when he asked the question nobody in tribal gaming had quite put so plainly: can you imagine a tribal operator doing this with the NIGC running interference?

Webster, a partner at Hobbs Strauss, was describing what the CFTC did on August 11 — issuing an emergency order directing Kalshi to keep trading in New York after the New York Attorney General sued the platform in state court and sought a restraining order. The CFTC's position, as Webster read it, is that even a court order telling a company to stop taking contracts does not override the federal agency's instruction to continue. That is a claim about institutional hierarchy that no gaming regulator has tried to make before, and Webster said plainly that it is the courts, not a federal agency, that hold that function.

The Nevada situation makes the conflict concrete. A judge ordered Kalshi to stop offering sports, election, and entertainment contracts by August 12. State investigators subsequently purchased event contracts in those banned categories using their phones. The Nevada Gaming Control Board filed for $120,000 per day in fines, arguing Kalshi had profited from continued violations. Kalshi's attorneys responded that the investigators had misrepresented their residency to get past the platform's geo-restrictions — which is either a serious allegation about state conduct or a sign that the compliance architecture has gaps large enough for a regulator with a phone to walk through. Possibly both.

The CFTC has filed federal lawsuits against at least nine states. That number is the tell. A single preemption argument in a single jurisdiction is a legal strategy. Nine simultaneous federal actions against state regulators, combined with emergency orders directing a private company to defy court-ordered trading halts, is something closer to a campaign. The federal agency has decided that the Commodity Exchange Act covers this ground entirely and that state gaming law does not reach prediction markets at all. Every court that disagrees becomes another front.

Webster's tribal gaming analogy is sharper than it sounds. Tribal operators function under a federal compact framework, and the NIGC does not intervene to keep a tribe operating when a state court orders a stop. The CFTC is doing something that has no clean precedent in gaming law, and Webster's point is that the novelty cuts against legitimacy, not toward it.

What the CFTC has not yet established is whether any court will ratify the emergency order logic on the merits. The preemption argument may be correct as a matter of federal law — the Commodity Exchange Act's supremacy clause language is not weak — but an agency directive telling a company to disregard a sitting court order is a different kind of claim than a statutory preemption defense filed in the ordinary course. One is an argument. The other is a posture. The Supreme Court, which has agreed to review the circuit split, will eventually have to decide whether the posture was warranted.