CFTC Invokes Emergency Powers to Keep Kalshi Operating Amid New York Gambling Lawsuit
Key Takeaways
- •The CFTC ordered KalshiEX LLC to continue operating under the Commodity Exchange Act’s core principles after Kalshi reported a market emergency.
- •New York sued Kalshi in July 2026, seeking to stop the company from offering event contracts on sports, elections, culture, and other events to state residents.
- •The CFTC said New York is also seeking at least $36 billion in compensatory damages.
- •Kalshi says its contracts are covered by federal commodities law, while New York argues they are unlicensed gambling subject to state regulation.
- •The CFTC has used emergency authority in this sector before, including a July 2026 order requiring Kalshi to honor pending trades after a Michigan court action.
The U.S. Commodity Futures Trading Commission (CFTC) has invoked emergency powers to order prediction-market operator Kalshi to continue operating, escalating a legal dispute with New York State over whether the platform's event contracts constitute illegal gambling.
The CFTC stated that it acted after Kalshi notified the agency of a market emergency arising from a lawsuit filed by New York Attorney General Letitia James. The agency directed KalshiEX LLC, the entity that operates the Kalshi platform, to continue its operations in accordance with the Commodity Exchange Act's core principles.
New York sued Kalshi in July 2026, seeking a temporary restraining order that would bar the company from offering event contracts tied to sports, elections, culture, and other events to state residents. According to the CFTC, the state is also seeking at least $36 billion in compensatory damages.
The dispute centers on a broader regulatory question: whether prediction markets should be treated as federally regulated financial markets or as gambling activities subject to state laws. Kalshi operates as a designated contract market under CFTC oversight and maintains that its event contracts fall under federal commodities law. New York contends that the contracts amount to unlicensed gambling and should be regulated under state law.
The CFTC's intervention marks another escalation in the growing conflict between federal and state authorities over prediction markets — an industry that has expanded rapidly as platforms increasingly offer contracts tied to sports, politics, economic data, and other real-world events. That growth has made the sector a recurring test case for how existing market rules apply to newer products that blur the line between trading and wagering.
This is not the first time the CFTC has exercised emergency authority in this space. In July 2026, the agency ordered Kalshi to fulfill pending trades after a Michigan court directed the company to cancel certain contracts involving Michigan residents.
The latest action underscores the regulatory uncertainty facing prediction-market operators. States are increasingly challenging these platforms' activities under gambling laws, while the CFTC simultaneously seeks to assert federal jurisdiction over the contracts. For market participants, that means the practical rules governing where these contracts can be offered and under what terms may continue to be shaped as much by court orders and agency actions as by the contracts themselves.
The outcome of the Kalshi dispute could carry implications well beyond a single company, potentially determining how prediction markets operate across the United States and the degree to which state gambling regulators can intervene in federally regulated markets.
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