The Commodity Futures Trading Commission has ordered KalshiEX to continue operating normally after New York moved to block the federally regulated prediction market from offering event contracts across the United States.

An emergency order issued August 11 directs Kalshi to keep performing its functions as a designated contract market under the Commodity Exchange Act. Kalshi had notified the regulator of a market emergency on August 1, one day after New York Attorney General Letitia James filed a sweeping enforcement action against the company.

New York is seeking a temporary restraining order covering all Kalshi event contracts nationwide, along with restitution, disgorgement, penalties, and damages exceeding $36 billion.

CFTC Treats New York Action as Market Emergency

Because Kalshi is headquartered in New York, a statewide operating restriction could disrupt the exchange well beyond customers physically located there. Kalshi is one of the few prediction market platforms operating under direct federal derivatives oversight, meaning any disruption to its infrastructure would affect traders nationwide regardless of their state of residence.

The CFTC determined that the threatened restrictions could interfere with Kalshi's ability to satisfy multiple designated contract market requirements covering fair access, market integrity, execution, clearing, and other core functions. The regulator ordered the exchange to continue operating under its normal practices while complying with federal market rules.

CFTC Chairman Michael Selig said derivatives exchanges cannot operate under conflicting state gaming regimes when transactions match participants across state lines and flow through federally supervised clearing infrastructure. The agency maintains that Congress granted it exclusive jurisdiction over event contracts traded on registered derivatives exchanges. That assertion of exclusive federal authority, if upheld by courts, would establish a precedent limiting the ability of individual states to apply gambling or wagering statutes to CFTC-registered exchanges.

That position has already led to a separate CFTC lawsuit seeking to stop New York from applying state gambling laws to federally registered prediction markets.

New York Seeks Penalties Over Unlicensed Gambling Claims

The July 31 complaint alleges that Kalshi operates an unlicensed gambling business by offering contracts tied to sports, elections, culture, and other future events without approval from the New York State Gaming Commission.

New York is also challenging Kalshi's sports products under state wagering rules, including age restrictions and licensing requirements. The petition seeks $100,000 for each alleged unauthorized offer of sports wagering, triple the gains linked to the challenged activity, restitution, and forfeiture of proceeds.

The dispute extends a state-federal conflict that has already reached Kentucky, where the CFTC sued after Kalshi and Polymarket faced illegal sportsbook claims. The growing number of states involved reflects a fundamental disagreement over whether event contracts constitute regulated financial derivatives or unauthorized gambling products, a classification question that has no settled judicial answer.

Prediction Markets Face Pressure on Multiple Fronts

Kalshi's federal backing does not resolve the New York lawsuit. The emergency order governs the exchange's CFTC obligations while courts separately determine how federal derivatives law interacts with state gambling authority. The outcome of these cases could shape the regulatory perimeter for all CFTC-registered prediction market operators, including how they structure products and which state laws they must observe.

Legal pressure is also expanding beyond state licensing. A recent House Oversight investigation asked Kalshi and Polymarket for records on KYC practices, suspicious trading, and access to non-public government information.

The CFTC has now challenged state prediction-market enforcement in Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin. Kalshi remains under the August 11 federal order requiring the exchange to continue its normal designated-contract-market operations while the New York case proceeds.