CFTC emergency order shields Kalshi from New York gambling ban

The Commodity Futures Trading Commission invoked emergency authority on Tuesday to order prediction market Kalshi to continue operating in New York. The federal intervention overrides a lawsuit filed days prior by state Attorney General Letitia James, who is seeking to block the platform's sports contracts.

The regulatory clash highlights the friction between state oversight and rapid financial technology expansion. Kalshi has reached a $4 billion annualized revenue run rate, doubling its figures from just two months ago, and is currently raising capital at a $40 billion valuation. This makes it one of the fastest-growing companies in finance.

New York asserts that sports prediction markets constitute illegal gambling that bypasses state licensing requirements. The state argues these operations deprive public schools and problem-gambling programs of crucial tax revenue. CFTC Chairman Mike Selig, a Trump appointee, rejected this framing, arguing the contracts are federally regulated swaps. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws,” Selig said, accusing New York of attempting to make the contracts “waste away under its iron curtain of state gaming laws.” He maintained these are interstate financial markets that New York “has no business” regulating.

This marks the third time the CFTC has used emergency powers to intervene on Kalshi’s behalf, following a similar move in Michigan. The federal regulator has also separately filed its own lawsuit against New York. However, the underlying legal disputes remain unresolved. A federal judge has already ruled against Kalshi’s initial bid to halt the state’s lawsuit, meaning the platform still faces significant legal headwinds despite the CFTC's support.

The dispute centers on a fundamental question for the broader financial sector: whether a federal derivatives license grants nationwide operational immunity, or if individual state regulators retain veto power over localized activity. With revenue doubling and a massive valuation on the line, both state and federal authorities have billions of reasons to press their respective claims. The ultimate outcome will dictate whether rapidly growing prediction markets can scale unimpeded across the United States.