Federal commodity regulators intervened Tuesday using emergency authority to maintain Kalshi’s New York operations, intensifying an unprecedented jurisdictional battle between federal and state authorities over prediction market oversight.
BREAKING: The CFTC invokes emergency authority to keep Kalshi alive against New York's $36 BILLION shutdown demand.
New York AG Letitia James sued to shut the prediction market down, calling it illegal gambling that exposed residents, including minors, to financial risk.… pic.twitter.com/XwEmDwXiwX
— Coin Bureau (@coinbureau) August 11, 2026
On the final day of July, New York’s top legal official Letitia James initiated litigation targeting Kalshi. State prosecutors allege the platform operates an unauthorized gambling enterprise through contracts linked to sporting events, political races, cultural phenomena, and various other occurrences.
According to state authorities, Kalshi failed to secure proper licensing from the New York State Gaming Commission. Authorized casino operators and mobile sports betting services contribute tax revenue supporting public education, youth athletic initiatives, and gambling addiction resources. State officials contend Kalshi has avoided these regulatory requirements.
State prosecutors seek restitution, profit disgorgement, and penalties equaling triple Kalshi’s purported gains. Additionally, they request $100,000 per unauthorized sports wagering opportunity presented to state residents, alongside compensatory damages of at least $36 billion.
Prosecutors petitioned the court for emergency injunctive relief blocking Kalshi from presenting contracts related to athletic competitions, electoral contests, and cultural events to New York-based users.
Federal regulators determined that New York’s enforcement initiative qualified as a market emergency warranting immediate action. The agency directed Kalshi to maintain standard operational procedures in accordance with the Commodity Exchange Act’s fundamental requirements.
CFTC Chair Michael Selig stated that congressional intent never envisioned derivatives exchanges navigating conflicting state gambling regulations. He emphasized that state authorities lack jurisdiction over interstate financial infrastructure connecting participants across multiple jurisdictions through centralized clearing systems.
Federal regulators assert exclusive oversight regarding event-based contracts classified as swaps on federally supervised exchanges. They warn that state-level restraining orders could disrupt Kalshi’s nationwide offerings, given the company’s New York headquarters.
Kalshi petitioned to relocate New York’s case to federal court. State prosecutors countered with a motion for remand. Judicial determination on these procedural matters remains pending.
Federal regulators have engaged in comparable disputes in Michigan. Kalshi’s compliance leadership indicated the company had already reversed transactions mandated by Michigan courts before federal authorities could intercede.
The federal emergency directive doesn’t terminate New York’s litigation or resolve fundamental questions about federal preemption of state gambling enforcement. These constitutional issues remain under judicial consideration.
Federal regulators have now initiated litigation against nine states collectively to preserve their prediction market authority. None of these cases have reached final disposition.
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