The U.S. Commodity Futures Trading Commission has ordered prediction market operator Kalshi to continue offering its services in New York, invoking its "emergency authority" after the state filed a lawsuit seeking to shut the platform down.

The federal commodities regulator announced the directive in a Tuesday press release, stating that Kalshi had requested assistance following a lawsuit brought by New York State Attorney General Letitia James at the end of July. The lawsuit aims to block Kalshi from operating sports-related prediction markets in the state. Kalshi, which operates as a CFTC-regulated exchange offering event contracts on elections, economic data, sports, and cultural events, has become a focal point in the broader debate over how these markets should be classified and governed.

The move marks the latest confrontation between federal and state regulators over the jurisdictional status of prediction markets — a sector that has expanded rapidly as platforms have attracted users wagering on outcomes ranging from political races to Federal Reserve decisions. State authorities have contended that prediction markets — particularly those tied to sports — constitute gambling platforms subject to state-level oversight. The CFTC, by contrast, has consistently asserted that all prediction markets fall under federal jurisdiction because they offer federally regulated swaps.

CFTC Chairman Mike Selig reinforced that position in a statement on Tuesday, declaring, "Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws."

"New York intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings," Selig continued. "These are financial exchanges that offer financial instruments and operate across state lines. They match the bid from a resident of one state with the offer of a resident from another state and submit the trade to a clearinghouse that backstops the transactions of customers throughout the country. New York has no business regulating these interstate financial markets."

The CFTC had previously sued New York over its stance on prediction markets.

New York filed its lawsuit against Kalshi on July 31, after a federal judge ruled against Kalshi's attempt to block the state from pursuing legal action. The state alleged that Kalshi was violating New York's gambling laws by offering sports prediction markets without proper authorization.

"Kalshi has failed to obtain a license from the New York State Gaming Commission (Gaming Commission), sidestepping its obligation to pay taxes like licensed casinos and mobile sports gambling platforms do," a press release from the state said. "This tax revenue from gambling regulation funds public schools, sports programs for underserved youth, and problem gambling education and treatment."

Kalshi subsequently moved to transfer the case to federal court, while New York sought to have it sent back to state court. Both motions are currently awaiting a judicial ruling. The venue question will determine which legal framework — federal derivatives regulation or state gaming law — governs Kalshi's operations, an outcome that could shape how other states approach prediction market platforms operating within their borders.

The CFTC's intervention in New York follows a similar action in Michigan, where the regulator previously stepped in to help Kalshi maintain operations after a judge ruled in the state's favor. However, Kalshi Head of Enforcement Robert Denault indicated in a post on social media that the company had already "unwound the trades" required by the Michigan court order.