CFTC emergency order keeps Kalshi trading despite NY suit
Federal regulators ordered Kalshi to maintain operations after a sweeping New York lawsuit threatened to shutter its $178 billion event contracts market, escalating a national turf war over derivatives.
The Commodity Futures Trading Commission invoked emergency authority on Tuesday to compel Kalshi to continue trading, stepping in after the exchange declared a market emergency.
The notification stemmed from a July 31 lawsuit filed by New York Attorney General Letitia James, which seeks a nationwide restraining order to halt Kalshi’s event contracts and demands over $36 billion in damages.
For investors, the state lawsuit represents a direct existential threat to a major derivatives venue. The petition treats Kalshi as an unlicensed gambling business, pointing to the exchange's $22 billion valuation and $178 billion in annualised trading volume. New York is demanding triple the company's gains plus $100,000 for each sports wagering offer.
CFTC Chairman Michael Selig framed the state's legal action as an effort to destroy the market before federal courts can rule on its legality. He argued New York wants event contract derivatives to "waste away under its iron curtain of state gaming laws."
"New York has no business regulating these interstate financial markets," Selig said. He contended that exchanges centrally clearing trades between buyers and sellers across state lines are financial venues, not gambling operations subject to a patchwork of local regulations.
The move marks an escalation in a broader federal-state turf war over event contracts. The CFTC has now sued nine states to block their attempts to police the derivatives, filing recent actions against Wisconsin and Minnesota, along with amicus briefs in the Sixth and Ninth Circuits and the Massachusetts Supreme Judicial Court.
Kalshi's courtroom record remains uneven. While the CFTC fights states, the exchange lost bids for a preliminary injunction in the Southern District of New York on July 7 and July 27. Michigan and Washington have also recently secured restraints against its sports markets, though Kalshi notched wins in the Third Circuit over New Jersey and in Minnesota. The conflict has drawn political weight, with President Donald Trump branding state officials who oppose prediction markets as "SCUM."
