USDKalshi Faces FlightAware Lawsuit as CFTC Challenges New York Crackdown
Prediction Market Operator Confronts Data, Safety and State-Federal Regulatory Disputes
TL;DR
- FlightAware sued Kalshi over its flight-cancellation markets, alleging unauthorized use of its data and name and seeking immediate and permanent court restrictions.
- The CFTC separately ordered Kalshi to keep operating under federal rules after New York sought to halt its business in the state.
- Kalshi is also fighting state restrictions over sports-related event contracts as the CFTC pushes for federal authority over prediction markets.
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Kalshi faced two separate legal and regulatory developments on Aug. 11, 2026, as FlightAware challenged the prediction market platform’s use of its data for flight-cancellation markets while the Commodity Futures Trading Commission intervened against New York’s effort to stop Kalshi from operating in the state. FlightAware’s claims remain allegations in pending litigation, while the CFTC’s action reflects a broader dispute over whether federally regulated prediction markets fall under federal authority or state gambling laws.
FlightAware filed its lawsuit on Aug. 10, accusing Kalshi of improperly using its data and name to “run gambling markets on flight cancellations.” FlightAware alleged that Kalshi relied on its flight-tracking information while presenting the companies in a way that suggested a close relationship, which FlightAware said jeopardized its reputation.
Kalshi launched the flight-cancellation markets in July 2026, according to FlightAware’s court filing. Kalshi told users that market outcomes would be “verified from FlightAware,” a representation that became a central part of FlightAware’s complaint.
“Kalshi never informed FlightAware that it would rely on FlightAware's data to determine the outcome of these betting markets,” FlightAware said in the complaint.
FlightAware also alleged that Kalshi’s presentation led customers to assume the flight-tracking company was involved with the markets. The dispute therefore centers not only on the underlying data but also on FlightAware’s contention that Kalshi created an unauthorized impression of commercial cooperation.
FlightAware Raises Safety and Trademark Claims
FlightAware separately raised public-safety concerns tied to wagering on flight cancellations. Kalshi’s contracts exclude payouts for cancellations involving malicious or security-related disruptions, but FlightAware argued that the markets could still create incentives for people to try to affect real-world flight outcomes.
FlightAware said the markets “can strand travelers, disrupt airline operations, and threaten safety.”
“There was widespread outrage and concern that the markets would incentivize unsafe tactics to impact cancellations, threatening public safety and creating the potential for massive disruption of air travel,” FlightAware said.
The lawsuit asserts breach of contract, trademark infringement and unfair competition. FlightAware is seeking a temporary restraining order, as well as preliminary and permanent injunctions that would bar Kalshi from activities involving the flight-tracking company.
The claims have not been adjudicated, and the supplied information contained no substantive Kalshi response to FlightAware’s allegations.
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CFTC Orders Kalshi to Keep Operating
Kalshi’s dispute with FlightAware emerged as the company was already fighting New York over the legal status of prediction markets. New York Attorney General Letitia James sued Kalshi on July 31, 2026, alleging that the company was operating an illegal gambling business in the state.
James sought a temporary restraining order that would stop Kalshi from operating in New York, along with restitution for users, disgorgement of profits and civil penalties that could total at least $36 billion.
The New York Attorney General argued that prediction markets meet the legal definition of gambling and alleged that Kalshi exposed New York residents, including people younger than the state’s legal gambling age of 21, to “serious personal and financial risk.” The lawsuit also alleges that Kalshi avoided paying applicable taxes.
The following day, Kalshi contacted the CFTC and warned that an “imminent market emergency” would occur if the requested temporary restraining order were issued, according to the agency.
On Aug. 11, the CFTC exercised emergency authority and ordered Kalshi to continue operating under its federal rules. The action marked another effort by CFTC Chair Michael Selig to assert federal jurisdiction over prediction markets.
“New York has no business regulating these interstate financial markets,” Selig said in a statement. “The Commission is required by law to ensure order in these markets, and that is what we have done today.”
The New York Attorney General’s office did not immediately respond to a request for comment on the CFTC’s intervention.
Kalshi defended its position by arguing that financial exchanges depend on broad liquidity. A Kalshi spokesperson compared the potential impact of removing New York from Kalshi’s market with shutting down a major national securities exchange in one jurisdiction.
“If Nasdaq shut down in New York: liquidity would dry up, prices would spike, and trading stocks and other instruments would become harder—sometimes impossible—for people everywhere across the country,” the Kalshi spokesperson said. “That’s why financial markets are regulated at the federal level.”
State-Federal Prediction Market Fight Expands
The New York case is part of a broader jurisdictional fight between the CFTC and state authorities over federally registered prediction markets, particularly contracts tied to sports outcomes.
Over the past year, the CFTC has brought complaints involving Wisconsin, Illinois, Arizona, Connecticut, New York, New Mexico, Minnesota and Rhode Island as the agency seeks what it describes as “exclusive jurisdiction” over federally registered prediction markets.
The supplied case references date the CFTC’s litigation involving Illinois, Arizona and Connecticut to April 2; New York to April 25; Wisconsin to April 28; Minnesota to May 19; and New Mexico to June 12. The information also identifies Rhode Island among the states challenged by the agency.
Selig has also launched a rulemaking process and maintained that the CFTC’s statutory authority is broad enough to regulate the prediction market industry. State authorities, meanwhile, have argued that some event contracts, particularly sports-related products, fall within state gaming and gambling laws.
Courts have produced different outcomes across jurisdictions. A Washington court on July 21 temporarily blocked Kalshi from offering sports-related event contracts in that state.
A Michigan judge issued a temporary restraining order against Kalshi on June 29, preventing it from offering sports-related event contracts there. A Michigan federal judge later denied Coinbase’s request on Aug. 7 for a preliminary injunction that would have blocked state enforcement involving sports event contracts.
Minnesota moved in the opposite direction. A judge there on July 28 blocked the state from enforcing its new prediction-market prohibition, allowing Kalshi and Polymarket to continue operating while litigation proceeds.
Kalshi and Polymarket have both seen rapid growth and reached multibillion-dollar valuations, and both companies have supported CFTC oversight of their businesses.
The jurisdictional dispute has also reached Congress. Senators and tribal gaming regulators have renewed efforts to add language to the Clarity Act that would preserve state authority over sports betting and prevent prediction markets from encroaching on that jurisdiction.
FlightAware’s case presents a separate legal issue from those state gambling disputes. Its complaint focuses on Kalshi’s alleged use of third-party data and branding for flight-cancellation contracts, while the state cases and CFTC actions concern who has authority to regulate prediction markets and sports-related event contracts.
This article has been refined and enhanced by ChatGPT.
