WASHINGTON — FlightAware thought it was in the business of tracking planes. Now it is in federal court against the company that turned its proprietary data into a market where people bet on whether those planes would land on time.
The civil complaint FlightAware filed against Kalshi on August 11 is the freshest legal blow against the dominant American prediction market platform — but hardly the first. Kalshi has spent much of 2026 defending itself against state attorneys general who call its event contracts illegal gambling, a battle that has already drawn the Commodity Futures Trading Commission into emergency interventions and produced federal lawsuits against nine states.
The FlightAware suit introduces a different kind of exposure: intellectual property. FlightAware’s complaint alleges that Kalshi incorporated proprietary flight delay and cancellation data into prediction market contracts without obtaining a license. FlightAware, which operates one of the world’s largest commercial flight-tracking networks, says Kalshi either lacked authorization to access its data or exceeded the scope of any agreement between the companies. Kalshi has not publicly responded to the specific allegations.
The broader state enforcement battle is further along. Arizona’s attorney general filed a 20-count criminal complaint against Kalshi in March — not against executives, but against the company itself, alleging it had operated an illegal gambling enterprise by using its federal designation as cover. Illinois, Massachusetts, Iowa, and Utah joined the coalition over the following months. And Michigan’s courts went further: a state judge issued an order directing Kalshi to cancel previously executed trades with Michigan residents.
The CFTC stepped in directly. In a July 14 emergency order, the commission stayed Kalshi’s proposed rule change that would have canceled those Michigan trades and ordered the platform to honor them. Chairman Michael S. Selig made the federal position explicit: “A state cannot force a DCM to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents.” The commission has since filed lawsuits against nine states attempting similar enforcement actions against Kalshi and other regulated exchanges.
What was once a regulatory novelty has become a multi-front legal emergency.
Kalshi’s defense rests on its status as a CFTC-designated contract market, a classification it received in 2023 that the company argues renders state gambling laws inapplicable under the Commodity Exchange Act’s preemption provisions. The CFTC’s backing is not merely sympathetic — the commission has become Kalshi’s active legal ally, filing briefs and emergency orders to blunt state enforcement across the country.
A federal judge’s decision in July to block Minnesota from enforcing its prediction market ban gave Kalshi a meaningful, if limited, procedural win. The Minnesota ruling did not address the Arizona criminal allegations — which involve claims of intentional circumvention rather than merely regulatory overlap — and it applied only to that state’s specific statutory structure.
Kalshi holds roughly 90 percent of the American regulated prediction market, built after the CFTC granted its designation. Its most recent valuation was estimated at $22 billion. No independent analyst has published a revised figure accounting for simultaneous defense against nine states and a new intellectual property complaint, though the exposure is material and growing.
New York pursued the most aggressive monetary posture, filing a Kalshi illegal gambling lawsuit seeking $36 billion at the end of July, characterizing the platform’s entire operation as unlicensed gambling under state law. The CFTC responded with an emergency restraining order to block that suit, arguing the federal preemption question had to be resolved before any state could pursue damages at that scale. The standoff remains unresolved.
What the legal picture still lacks is a final answer. No federal appeals court has ruled directly on whether CFTC preemption shields a designated contract market from state gambling enforcement. The earlier ruling blocking the prediction market ban in Minnesota may prove to be the high-water mark for Kalshi’s preemption defense rather than the first of many wins.
The FlightAware complaint introduces a category of risk the preemption doctrine does not address. Whether or not Kalshi is permitted to operate prediction markets, it is independently alleged to have used someone else’s proprietary data to power them. According to the CFTC’s July emergency order, KalshiEX is a federally designated contract market — a status that protects it from state interference but says nothing about its obligations to private companies whose data it accesses. If FlightAware’s account survives discovery, Kalshi faces liability that exists entirely outside the gambling-law question.
Kalshi has not disclosed how it plans to respond to the Arizona criminal complaint. That case, with 20 counts against a federally licensed company, sits in procedural territory without close precedent. The question of whether a CFTC designation can shield a company from state criminal prosecution — as opposed to civil enforcement — has not been tested at the appellate level.
A federal license, the Kalshi litigation has demonstrated, is not the same as a federal shield. The market dominance, the $22 billion valuation, the CFTC’s emergency interventions — none of it has stopped nine states from acting and one data company from suing. Whether that changes when the preemption question finally reaches a federal appeals court is the one thing about Kalshi’s future that can be said with confidence.
Related Posts
