On August 11, the Commodity Futures Trading Commission invoked emergency authority to order Kalshi to keep operating under federal rules, cutting off a New York effort to shut the exchange down less than two weeks after the state’s attorney general filed suit, stating that the platform offered services that were "quintessentially gambling."
Neither side has won the underlying battle. The emergency order settles nothing except who’s allowed to keep trading while the courts sort out the rest.
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What the CFTC Ordered
The CFTC directed Kalshi to continue operating in accordance with the Commodity Exchange Act’s Core Principles, the standing rulebook every federally Designated Contract Market has to follow, after Kalshi notified the Commission of what it called an imminent market emergency tied to New York’s push for a restraining order.
Kalshi holds the same DCM status as major futures exchanges, which underpins the CFTC’s claim to oversight in the first place. CFTC Chairman Michael Selig framed the move as a jurisdictional line in the sand: “New York has no business regulating these interstate financial markets. The Commission is required by law to ensure order in these markets, and that is what we have done today.”
A CFTC spokeswoman, Brooke Nethercott, put it more bluntly: “The New York State Attorney General does not set the rules for national derivatives markets.” The Commission tied its authority to the Commodity Exchange Act’s mandate to maintain a uniform national market for derivatives and protect the orderliness of centralized trading.
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How New York Got Here
New York’s fight with Kalshi didn’t start with the emergency order. Kalshi first sued the state back in October 2025 after receiving a cease-and-desist letter, arguing federal law preempted state gambling authority over its contracts.
That argument lost in July 2026, when US District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction. She ruled that the Commodity Exchange Act’s own savings clause preserves state authority and noted flatly that “there is nothing preventing Kalshi from obtaining a license pursuant to New York law.”
Three weeks later, on July 31, New York Attorney General Letitia James escalated further, suing Kalshi directly and seeking a temporary restraining order to bar the exchange from offering event contracts nationwide. The $36 billion lawsuit comes from the state’s gambling statutes, which allow treble damages plus civil penalties of up to $100,000 per unlawful sports wagering offer.
The complaint also argues Kalshi exposed New York residents, including minors under 21, to financial risk through an unlicensed gambling operation.
The Jurisdictional Question Underneath It All
Both sides are arguing about the same basic question from opposite directions: is a Kalshi event contract a federally regulated derivative, or a state-regulated wager?
The CFTC’s position is that the Commodity Exchange Act requires a single national market for derivatives, and that state-by-state gaming rules would fracture something Congress meant to keep uniform.
Judge Torres reached the opposite conclusion in her July ruling, finding the same statute leaves room for state gambling law to apply alongside federal oversight.
New York isn’t an isolated case either. The CFTC has now sued nine states, including Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin, alongside New York, to defend its claimed exclusive jurisdiction over prediction markets.
Why This Reaches Past New York
New York is the loudest fight, but not the only one, and that’s what makes the emergency order significant beyond a single state.
The same jurisdictional question, federal derivatives law versus state gambling law, is being litigated in
eight other states
simultaneously, and a ruling against the CFTC’s theory in any one of them could reshape how prediction markets operate nationwide.
There’s also a legislative angle running in parallel: some states and tribal gaming regulators are pushing to add prediction market provisions to the pending Clarity Act specifically to lock in state jurisdiction, which would undercut the CFTC’s position regardless of how the current lawsuits resolve.
Where This Leaves Kalshi
The emergency order keeps Kalshi live for New York users for now, but it’s an operational fix, not a legal resolution.
New York’s $36 billion case remains pending, Judge Torres’s July ruling stands as precedent against CFTC preemption in at least one federal district, and nothing about the emergency order changes the underlying legal question the courts still have to answer.
If you’re tracking which platforms are live and where, Dimers keeps an updated
list of prediction markets
as the regulatory picture continues to shift.
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