Trump & Co. slam NY over Kalshi kerfuffle

Daily Point

Regulatory storm over prediction markets pits feds against states

After Gov. Kathy Hochul and Attorney General Letitia James sued the prediction market platform Kalshi for $36 billion Friday — alleging an illegal gambling operation — the response from Trump administration regulators sounded more pungently political than official or businesslike.

"Rather than seek reasoned answers from the courts, Letitia James and New York seek to force an unprecedented sudden shutdown of prediction markets nationwide," said a strident Michael S. Selig, chairman of the Commodity Futures Trading Commission. "The @CFTC has already sued to stop this and will continue to defend its jurisdiction."

President Donald Trump tapped Selig last year to deregulate the crypto business in which Trump son Donald Trump Jr. is involved — as he is with Kalshi, where he's a "strategic advisor." In another personal edge, James brought the 2024 civil case against Trump on fraud charges.

For its part, Kalshi's communications office reacted with palpable partisan spin. "It's sad to see this type of political theater from the leadership in our state. States can't just shut down a federally licensed exchange. This would also hurt New Yorkers, who would be driven offshore ... New Yorkers love our product." The company said the suit was filed to "please the casinos."

Predictably, Trump fan and GOP Nassau County Executive Bruce Blakeman, who is running against Hochul, is siding with the federal agency and the company against state leaders. Blakeman fumed that before the state filed its case, Hochul "walked away from a lucrative settlement with Kalshi, a popular commodity predictor site. Hochul left billions on the table." The state had been in discussions about taxes and protections for consumers.

Blakeman's running mate opposing James, Saritha Komatireddy, said through a spokesperson that James should instead be spending more time on crime, mentally ill homeless people and Medicaid fraud recovery, but that "this AG loves her headlines." Komatireddy's statement, unlike Blakeman's, did not slam the lawsuit on the legal merits or characterize Kalshi's business.

For her part, Hochul maintains that Kalshi "has chosen to ignore New York's gaming laws" that aim to protect consumers, fund public services and keep companies competitive.

The national regulatory storm over prediction markets has put states and the federal government on opposite sides — and at least this time, not along party lines.

In April, a bipartisan coalition of 41 state attorneys general, co-led by Ohio's Republican AG Dave Yost, urged federal regulators to reaffirm that states have jurisdiction over sports-related "event contracts," as these yes-no prediction bets are known.

"This is gambling, no matter how they try to dress it up — and that means it belongs under state jurisdiction," Yost said. "States have a longstanding right and responsibility to protect their citizens from the dangers of gambling, whether it's on a prediction market or a casino floor."

And in a Long Island twist, former Rep. George Santos agreed to pay $35,000 to "settle" a federal probe into his suspicious Kalshi trades after he bet against whether he'd attend Trump's State of the Union in February. He claimed he had been held up at an airport.

Santos' lawyer Joseph Murray said in a statement posted on X: "He chose a prompt, practical resolution, rather than protracted, costly litigation, and that choice should not be mistaken for admission of any wrongdoing, because it is not one."

According to the CFTC, Santos must pay more than $17,000 earned from unlawful trading and a fine of $17,500 — in addition to complying with a three-year trading ban. Santos had been paid as an "influencer" for Polymarket, the other major "prediction" platform, using his own platform to promote that brand, but the company announced in June it was cutting ties to him in light of the probe.

Last year, Trump ordered Santos sprung from prison after his MAGA admirer served just 3 months of a 7-year sentence for fraud and other crimes. Will anyone try to bet on whether the ex-congressman stays out of trouble from now on?

— Dan Janison dan.janison@newsday.com

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Quick Points

Horror movie narratives abound on LI

• A pair of thrill seekers banged on the door of Gilgo serial killer Rex A. Heuermann's Massapequa Park home last week, an incident caught on a Ring doorbell camera video. That sounds like the plotline of a B horror movie.
• Speaking of cheap horror movie plotlines, tularemia joins the growing list of tick-borne illnesses impacting Long Islanders. Last week, Suffolk County health officials said there are at least three cases of the serious illness being transmitted to people by ticks from sick wild rabbits. On its list of steps to prevent tularemia, the Centers for Disease Control and Prevention suggests "Avoiding mowing over dead animals." Paging Stephen King.
• Suffolk is also dealing with a Legionnaires' disease positive test in a cooling tower on top of the state Supreme Court building in Riverhead. Tularemia, Legionnaires, flesh-eating bacteria ... anyone else ready to fast-forward to winter?
• The U.S. delegation stomped out of a United Nations Security Council meeting last week during France's criticism of America's recent human rights record. Time to fire up a batch of former Rep. Bob Ney's Freedom Fries!

— Mark Nolan mark.nolan@newsday.com

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