MoFo's Financial Markets & Innovation

New York State Announced Lawsuit Against Kalshi

On July 31, New York Governor Kathy Hochul and Attorney General Letitia James announced that New York has sued Kalshi for gambling through its prediction market. The Office of the Attorney General alleges that Kalshi’s prediction market meets the definition of gambling without obtaining a New York State Gaming Commission license. Additionally, the lawsuit alleges that, because users aged 18 to 20 can participate, the platform runs afoul of New York law requiring a person to be at least 21 to engage in gambling. The lawsuit seeks a court order to stop Kalshi from operating, requiring it to forfeit all illegal gains, pay fines, and pay restitution to harmed consumers.

CFTC and George Santos Reach Insider-Trading Settlement

On July 31, the CFTC announced a settlement order against former Congressman George Santos for engaging in trading of an event contract on his own attendance at the 2026 State of the Union. While holding positions in this market, Santos posted on social media about his plans to attend or not attend, causing contract prices to move in his favor and allowing him to profit over $17,500. Under the settlement, Santos must disgorge $17,569.98 in profits, pay a civil monetary penalty of $17,500, and is subject to a three-year trading ban.

Senators Inquire on Wildfire-Based Events Contracts

Nine Democratic Senators sent a letter to CFTC Chair Michael Selig requesting the agency investigate prediction markets that offer event contracts on wildfires. They caution that offering wildfire contracts may create risk of arson to ensure contract success. The August 3 letter requests information on future CFTC action on wildfire contracts, including potential regulatory guidance and enforcement action. The Senators request a response by August 14.

SEC Establishes New Enforcement Unit on Financial Reporting and Accounting

On August 5, the SEC announced the establishment of a new specialized unit in the Division of Enforcement to pursue accounting and financial reporting fraud cases, as well as general misconduct in the areas of accounting and auditing. According to the SEC, the Financial Reporting and Accounting Unit will be led by Timothy Zimmerman of the Division of Enforcement and staffed by attorneys and accountants with specialized skills in financial reporting, accounting, and auditing in securities regulation.