The Commodity Futures Trading Commission (CFTC) invoked its emergency authority on Tuesday to order Kalshi to continue trading, following the exchange’s notification of a market emergency. This intervention comes after the New York Attorney General filed a lawsuit seeking to halt Kalshi’s nationwide offering of event contracts and demanding over $36 billion in damages.
The CFTC’s order directs KalshiEX to operate in line with the Commodity Exchange Act, the federal standards governing designated contract markets. The exchange had notified the CFTC of a market emergency on July 31, the same day New York Attorney General Letitia James filed her petition in state court. The lawsuit seeks a restraining order to prevent Kalshi from offering event contracts across the country and claims damages exceeding $36 billion, according to the petition.
CFTC Chairman Michael Selig criticized the New York Attorney General’s action, stating that the state is attempting to regulate interstate financial markets under state gaming laws. According to CFTC Chairman Michael Selig, New York wanted event contract derivatives to “waste away under its iron curtain of state gaming laws” before any final ruling. He argued that exchanges matching bids in one state against offers in another, and clearing trades centrally, constitute interstate financial venues rather than gambling operations. “New York has no business regulating these interstate financial markets,” Selig stated, adding that Congress did not intend for derivatives exchanges to be subject to a patchwork of state gaming laws.
The petition filed by the New York Attorney General reportedly cites Kalshi’s valuation at $22 billion and its annualized trading volume at $178 billion. The petition treats Kalshi as an unlicensed gambling business across eight counts, seeking three times its gains and $100,000 for every sports wagering offer.
Kalshi has faced previous legal setbacks. On July 7, a judge in the Southern District of New York denied Kalshi a preliminary injunction against the state gaming regulator. Further, on July 27, a judge refused protection pending appeal for the exchange. In June, Michigan restrained Kalshi’s sports markets, and in July, Washington obtained a preliminary injunction against the platform.
The CFTC has indicated it has sued nine states and has filed amicus briefs in the Sixth and Ninth Circuits, as well as before the Supreme Judicial Court of Massachusetts. President Donald Trump has publicly supported the CFTC’s stance, describing state officials who oppose prediction markets as “SCUM.”
Significant uncertainties remain regarding the ultimate outcome of the New York lawsuit and the broader regulatory status of event contracts. The legal definition of these instruments as interstate financial markets versus gambling operations is a central point of contention, and the resolution of the CFTC’s lawsuits against nine states is also pending.
The CFTC’s intervention highlights a critical juncture in the regulation of novel financial instruments, signaling a potential federal stance against state-level attempts to classify and regulate these markets as gambling. However, the legal challenges and jurisdictional conflicts underscore the ongoing debate over federal versus state authority in financial market oversight.
Why This Matters
The materials describe a narrow update: The CFTC used its emergency authority to order Kalshi to continue trading. The ultimate outcome of the New York lawsuit against Kalshi.
Broader Context
Source materials place the factual news in this context: The Commodity Futures Trading Commission has invoked its emergency authority to order Kalshi to carry on trading, acting on Tuesday after the exchange itself notified the agency of a market emergency.
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