CFTC Uses Emergency Powers to Keep Kalshi Trading Amid New York Lawsuit

In Brief

• The CFTC has invoked its emergency authority to require Kalshi to continue operating after the exchange reported a market emergency to the agency.
• Kalshi submitted the emergency notification following New York Attorney General Letitia James’ lawsuit filed on July 31.
• The CFTC says it has now taken legal action against nine states over their efforts to regulate event contracts.

The Commodity Futures Trading Commission (CFTC) has used its emergency authority to order Kalshi to continue trading after the prediction market exchange notified the agency of a market emergency.

The order requires KalshiEX to remain operational in accordance with the Commodity Exchange Act’s core principles governing designated contract markets. Kalshi submitted its emergency notification after New York Attorney General Letitia James filed a lawsuit against the platform on July 31, seeking to block its event contracts nationwide and pursuing more than $36 billion in damages.

CFTC Chairman Michael Selig criticized New York’s legal action, arguing that the state is attempting to shut down Kalshi’s market before the courts reach a final decision. He said New York was effectively seeking to leave event-contract derivatives subject to state gaming laws while the broader legal dispute remains unresolved.

Selig maintained that exchanges matching bids and offers across state lines and centrally clearing those transactions operate as interstate financial markets rather than gambling platforms. He argued that New York should not have authority over these interstate derivatives markets and that Congress did not intend for federally regulated exchanges to face conflicting state-by-state gaming regulations.

Washington Against the States

The federal agency has now taken legal action against nine states while also filing amicus briefs in the Sixth and Ninth Circuits and before the Supreme Judicial Court of Massachusetts.

The agency’s campaign has expanded throughout the year, beginning with Illinois, Arizona, and Connecticut before moving into Wisconsin and Minnesota. In Minnesota, the lawsuit was filed within hours of the state’s prediction market ban taking effect. President Donald Trump has also publicly backed the agency, sharply criticizing state officials who oppose prediction markets.

Kalshi has faced a more difficult path in court than the CFTC. On July 7, a judge in the Southern District of New York denied Kalshi’s request for a preliminary injunction against the state gaming regulator, followed by another setback on July 27 when the court refused to grant protection while the appeal was pending. Michigan also restricted Kalshi’s sports markets in June, while Washington secured a preliminary injunction in July. Kalshi, however, has recorded victories in the Third Circuit against New Jersey and in Minnesota.

James’ petition takes a more aggressive position, characterizing Kalshi as an unlicensed gambling business across eight counts. The filing seeks three times the company’s alleged gains, along with $100,000 for each sports wagering offer. It also cites Kalshi’s own figures, valuing the exchange at $22 billion and placing its annualized trading volume at $178 billion.