CFTC Orders Kalshi to Keep Operating as New York Gambling Fight Escalates

WASHINGTON – The Commodity Futures Trading Commission has used emergency powers to order Kalshi to keep operating as New York seeks to enforce its gambling laws against the exchange.

The directive puts the federal regulator in direct conflict with New York’s effort to restrict Kalshi while courts decide whether state gambling laws can reach a CFTC-designated exchange. The action does not itself invalidate New York law or resolve the underlying jurisdictional dispute.

The CFTC said that it acted after KalshiEX notified the commission of a “market emergency” following Attorney General Letitia James’ July 31 state-court lawsuit. The agency ordered Kalshi to continue operating in accordance with the Commodity Exchange Act’s Core Principles.

CFTC Says State Action Threatens National Market

Chairman Michael Selig said the Commodity Exchange Act requires a uniform national derivatives market and argued that state gambling rules should not fragment oversight of designated contract markets. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws”, Selig said.

The CFTC described New York’s action as seeking a temporary restraining order that would stop Kalshi from offering all event contracts nationwide and more than $36 billion in damages. That figure comes from the federal regulator’s description of the case. New York’s verified July 31 petition does not state a single total damages figure, instead seeking restitution, disgorgement, damages, penalties equal to three times alleged gains and $100,000 for each unauthorized sports wagering offering.

New York Says Kalshi Is Unlicensed Gambling

New York alleges that Kalshi’s event contracts amount to gambling because users put money on uncertain outcomes outside their control, including sports, elections and cultural events. The state also says Kalshi operates without a New York State Gaming Commission license and makes its platform available to users aged 18 to 20, while New York requires mobile sports bettors to be at least 21.

The July 31 lawsuit against Kalshi seeks a permanent injunction against the company operating an alleged unlicensed gambling business within New York or offering the activity to people in the state. James said, “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”

Kalshi maintains that its products are federally regulated derivatives and that states cannot apply gambling rules in a way that interferes with a federally designated contract market. That position remains at the center of several court disputes over prediction markets and state gaming authority.

Federal-State Jurisdiction Fight Remains Unresolved

Kalshi has already failed to secure preliminary relief in its separate federal case against New York regulators. On July 7, U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction, finding at that stage that New York gambling laws as applied to its sports-event contracts were not preempted by the Commodity Exchange Act.

Kalshi appealed that ruling, while the CFTC is separately challenging New York and other states over prediction-market jurisdiction. The commission said it has filed lawsuits against New York and eight other states as it seeks to protect what it considers exclusive federal authority over designated contract markets.

The Aug. 11 emergency action therefore keeps the regulatory conflict active rather than settling it. The next major developments will come from the state enforcement case, Kalshi’s federal appeal and the CFTC’s own litigation over whether state gambling powers can coexist with federal derivatives regulation.

RELATED TOPICS: Regulation