CFTC Says It May Force Kalshi to Keep Trading in New York Even if a State Court Bans It

The Commodity Futures Trading Commission says it may force Kalshi to keep offering its event contracts in New York even if a state court orders the prediction market platform to shut down. The CFTC made the claim in an emergency order letter published Tuesday, escalating an already heated jurisdictional fight between the federal regulator and New York over who has the authority to police prediction markets.

The order responds directly to a lawsuit New York filed against Kalshi in state court on July 31. The state is seeking a temporary restraining order that would bar Kalshi from “operating a business that offers contracts relating to sports, culture, elections, and other events” within New York or to New York residents. The CFTC warned that such an order could effectively cut off Kalshi’s event contracts nationwide, since the company is based in the state.

New York’s $36 Billion Ask

New York Attorney General Letitia James, joined by Governor Kathy Hochul, called Kalshi an illegal, unlicensed gambling operation in the state court filing. The lawsuit seeks restitution, disgorgement of profits, and penalties that include triple Kalshi’s alleged gains plus $100,000 for every unauthorized sports wagering offer made in New York — a combination that outside estimates have placed at roughly $36 billion.

James has also alleged that Kalshi allowed users between 18 and 20 years old to trade sports-related contracts, even though New York requires bettors to be at least 21 to wager on mobile sportsbooks. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said when the suit was announced. Kalshi has dismissed the case as political theater and maintains that a state cannot shut down an exchange licensed at the federal level.

A Fight the CFTC Has Picked in Nine States

The CFTC’s emergency order invokes Section 8a(9) of the Commodity Exchange Act, which allows the agency to intervene when it determines a “major market disturbance” threatens orderly trading. CFTC Chairman Michael Selig framed New York’s push as a threat to a uniform national derivatives market, arguing that “New York has no business regulating these interstate financial markets.” This marks the second time in roughly a month the CFTC has used emergency authority to keep Kalshi operating amid a state confrontation, and the agency says it has now sued New York and eight other states — including Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin — to defend what it considers its exclusive jurisdiction over event contracts.

The broader legal picture remains a mess of conflicting rulings. On July 7, a federal judge in Manhattan denied Kalshi’s bid to block New York’s gaming regulators, ruling the state’s gambling laws were not preempted as applied to Kalshi’s sports-event contracts — a decision James’s office leaned on when it filed its own suit three weeks later. Just days before that, a separate federal judge blocked Minnesota from enforcing a law that would have made operating a prediction market a felony. Kalshi has also won injunctions against Nevada and New Jersey, with the New Jersey ruling affirmed on appeal by the Third Circuit, while losing outright in Maryland and seeing a Nevada judge reverse an earlier win against the company.

What Happens Next

The CFTC’s order does not resolve the underlying dispute and is not a judicial ruling on federal preemption — it simply directs Kalshi to keep functioning as an exchange under its normal practices while the state court case proceeds. Because emergency orders issued under Section 8a(9) can only be reviewed by a federal appeals court, New York’s next moves will likely determine whether this becomes the case that finally forces a definitive answer on whether prediction markets tied to sports outcomes are federally regulated derivatives, state-regulated gambling, or something the courts are still sorting out state by state.

Kalshi notified the CFTC on August 1 that New York’s requested restraining order would threaten its ability to meet the eight statutory core principles the exchange must satisfy as a CFTC-designated contract market, a status it has held since November 2020. That designation is central to the company’s defense: Kalshi argues that a single state cannot unilaterally shut down an exchange that operates under federal license nationwide, regardless of how New York chooses to characterize its sports-related contracts. The CFTC’s position mirrors that argument almost exactly, with Selig maintaining that Congress never intended derivatives exchanges to answer to a patchwork of state gaming laws.

For now, the practical effect is that Kalshi keeps trading in New York while lawyers on both sides argue over jurisdiction in multiple courtrooms at once. For bettors and traders following the broader shift toward prediction markets, the stakes go well beyond one state — a definitive ruling against Kalshi in New York could embolden other states pursuing similar enforcement actions, while a win could further cement the CFTC’s claim to exclusive federal oversight of the fast-growing prediction market industry, including popular platforms like Polymarket.