CFTC Invokes Emergency Authority to Keep Kalshi Operating Amid NY Lawsuit
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The U.S. Commodity Futures Trading Commission on Tuesday invoked emergency authority to block any shutdown of prediction market platform Kalshi, ordering it to continue operations after New York Attorney General Letitia James sued the company in July. The CFTC said Kalshi must remain open under federal rules, overriding the state’s attempt to halt its activities. The move marks CFTC Chair Michael Selig’s latest push to assert exclusive jurisdiction over prediction markets, even as New York seeks at least $36 billion in penalties.
The Emergency Order
The CFTC invoked Section 8a(9) of the Commodity Exchange Act to declare an emergency and require Kalshi to remain operational. Chair Michael Selig stated that New York has no business regulating interstate financial markets, emphasizing the Commission’s duty to maintain order. Kalshi had warned the CFTC on the day after the lawsuit that a temporary restraining order would cause an “imminent market emergency.” The platform’s spokesperson compared a New York shutdown to a Nasdaq closure, arguing it would dry up liquidity and spike prices nationwide.
New York’s Legal Challenge
Attorney General Letitia James sued Kalshi in July, alleging it operates an illegal gambling business under state law. The lawsuit claims prediction markets expose New Yorkers, including those under 21, to serious financial risk and that Kalshi has avoided paying applicable taxes. James requested a temporary restraining order, restitution for users, disgorgement of profits, and civil penalties that could exceed $36 billion. The CFTC’s action effectively preempts that order, asserting federal oversight.
Federal-State Jurisdiction Battle
Over the past year, the CFTC has filed lawsuits against New York, Illinois, Arizona, Connecticut, and other states to secure exclusive jurisdiction over federally registered prediction markets. Chair Selig has launched a rulemaking process and maintains the agency’s authority is broad enough to regulate the sector, even as states argue the platforms violate local gaming and gambling laws, particularly sports betting. The CFTC’s emergency order marks a direct confrontation with New York’s push to regulate Kalshi under state gambling statutes.
What's Next
The New York Attorney General has not yet responded to the CFTC’s action, leaving open the possibility of a court clash over jurisdiction. The outcome could set a precedent for whether states or the federal government will govern the rapidly expanding prediction market industry.
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CFTC Invokes Emergency Authority to Keep Kalshi Operating Amid NY Lawsuit
