The Commodity Futures Trading Commission has ordered KalshiEX to continue operating normally after New York sought to block the federally regulated prediction market from offering event contracts nationwide.
The August 11 emergency order directs Kalshi to continue performing its functions as a designated contract market under the Commodity Exchange Act. Kalshi 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 alongside restitution, disgorgement, penalties and damages exceeding $36 billion.
Kalshi is headquartered in New York, leaving a statewide operating restriction capable of disrupting the exchange beyond customers physically located there.
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.
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 gave it exclusive jurisdiction over event contracts traded on registered derivatives exchanges.
That position has already produced a separate CFTC lawsuit seeking to stop New York from applying state gambling laws to federally registered prediction markets.
The July 31 complaint alleges 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, three times gains linked to the challenged activity, restitution and forfeiture of proceeds.
The dispute extends a state-federal fight that has already reached Kentucky, where the CFTC sued after Kalshi and Polymarket faced illegal sportsbook claims.
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.
Legal pressure is also expanding beyond state licensing. A recent House Oversight investigation asked Kalshi and Polymarket for records on KYC, 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 an August 11 federal order requiring the exchange to continue its normal designated-contract-market operations while the New York case proceeds.
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