CFTC orders Kalshi to keep operating as New York lawsuit seeks to shut down event contracts

The Commodity Futures Trading Commission has used emergency authority to tell Kalshi to keep operating while New York tries to stop its event contracts in court. For high-risk operators and PSPs, the important part is not the theater: it is the fight over whether prediction markets sit under federal derivatives law or state gambling law.

1. The CFTC said in a Tuesday, Aug. 11 press release that it acted after KalshiEX notified the agency of a market emergency tied to a July 31 lawsuit filed by New York Attorney General Letitia James. The commission ordered Kalshi to continue operating under the Commodity Exchange Act’s Core Principles that govern federally regulated designated contract markets.
2. The order puts the CFTC directly between Kalshi and New York at a moment when the broader jurisdictional fight over prediction markets is getting sharper. The CFTC’s position is that federally regulated event contracts are derivatives subject to a single national framework, while states are arguing more aggressively that contracts based on sports and other events are gambling and therefore fall under state law.
3. James’ lawsuit seeks a temporary restraining order that would bar Kalshi from offering event contracts nationwide, plus more than $36 billion in damages. According to Decrypt, the complaint treats Kalshi as an unlicensed gambling business and seeks three times its alleged gains, as well as $100,000 for every sports wagering offer.
4. CFTC Chairman Michael Selig said the agency intervened to stop a state enforcement action from disrupting a national derivatives market before courts resolve the underlying jurisdictional dispute. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws,” he said in the press release, arguing that Kalshi and similar platforms are interstate financial exchanges because they match bids and offers from customers in different states and clear transactions centrally.
5. The federal-state fight is still expanding. The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin to defend what it says is the jurisdiction Congress gave it, and it has also filed amicus briefs in cases before federal appeals courts and the Massachusetts Supreme Judicial Court. Decrypt also reported that Kalshi was denied a preliminary injunction against New York’s gaming regulator by a federal judge in July.