CFTC orders Kalshi to continue operating amid New York lawsuit

On August 11, 2026, the CFTC invoked its emergency authority to order prediction market Kalshi to continue operating. This directive follows a July 31, 2026, lawsuit by New York Attorney General Letitia James, who accuses Kalshi of running an illegal gambling business and seeks $36 billion in penalties. CFTC Chair Michael Selig argues that federal law preempts state gaming regulations for these interstate financial exchanges, setting up a major jurisdictional clash.

CFTC emergency order for Kalshi

• ▪The Commodity Futures Trading Commission issued its emergency order after Kalshi warned the agency that an imminent market emergency would occur if New York obtained a temporary restraining order
• ▪The Commodity Futures Trading Commission invoked its emergency authority on August 11, 2026, ordering prediction market platform Kalshi to continue operating under its rules
• ▪The Commodity Futures Trading Commission stated that New York's requested temporary restraining order could prevent Kalshi from offering event contracts nationwide because the platform is based in New York

New York lawsuit against Kalshi

• ▪New York's lawsuit alleges Kalshi failed to obtain a license from the New York State Gaming Commission, thereby avoiding applicable taxes that fund public schools and sports programs
• ▪New York Attorney General Letitia James sued Kalshi on July 31, 2026, alleging the platform operates an illegal, unlicensed gambling business by offering contracts tied to sports, elections, culture, and other events
• ▪Kalshi moved to transfer the New York state lawsuit to federal court, while New York moved to transfer the case back to state court, with both motions awaiting a judge's ruling
• ▪The New York Attorney General's lawsuit seeks a temporary restraining order, restitution, disgorgement of profits, and civil penalties that could total at least $36 billion

Federal-state jurisdiction dispute

• ▪The Commodity Futures Trading Commission argues that the Commodity Exchange Act grants it exclusive jurisdiction over transactions involving swaps traded on designated contract markets, including Kalshi's event contracts
• ▪Commodity Futures Trading Commission Chair Michael Selig stated that Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws
• ▪The Commodity Futures Trading Commission sued New York in federal court in April 2026 to block the state from applying gambling laws to federally registered contract markets, but Judge Jed Rakoff denied the emergency request
• ▪A federal judge denied Kalshi's request for a preliminary injunction on July 7, 2026, finding that New York gambling laws were not preempted by the Commodity Exchange Act regarding sports-event contracts

Prediction market regulatory landscape

• ▪The Commodity Futures Trading Commission has sued nine states, including New York, Illinois, Arizona, and Connecticut, to defend its exclusive jurisdiction over federally registered prediction markets
• ▪The Commodity Futures Trading Commission previously intervened to help Kalshi continue operating in Michigan, though Kalshi Head of Enforcement Robert Denault stated the company had already unwound the required trades
• ▪United States senators and tribal gaming regulators have sought to add language to the Clarity Act to preserve state authority over sports betting and prevent prediction markets from encroaching on that jurisdiction