CFTC uses emergency powers to keep Kalshi exchange operating amid New York suit

The Commodity Futures Trading Commission said Tuesday that it used emergency powers to order KalshiEX, LLC to keep operating under federal derivatives rules, an unusually direct intervention aimed at keeping the event-contract exchange running as it fights a state enforcement action. In a press release, Release No. 9281-26, the CFTC said it had “exercised its emergency authority” and directed Kalshi to “continue to operate in accordance with the Commodity Exchange Act’s Core Principles.”

The agency said Kalshi notified the CFTC of a “market emergency” after New York Attorney General Letitia James filed a state-court complaint against the company on July 31. According to the CFTC’s description of that lawsuit, New York is seeking a temporary restraining order that would bar Kalshi from offering all event contracts nationwide and is also seeking more than $36 billion in damages.

KalshiEX is a designated contract market, meaning a federally regulated exchange overseen by the CFTC that offers event contracts. The Aug. 11 order marks a forceful federal move to keep a CFTC-regulated market operating amid an escalating clash over whether states can use gambling laws against exchanges that are already regulated under federal derivatives law.

CFTC Chairman Michael S. Selig said the Commission acted to prevent state-by-state interference with markets Congress placed under federal supervision. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws. … The Commission is required by law to ensure order in these markets, and that is what we have done today,” Selig said in the press release. The CFTC said the action was meant to protect a uniform national derivatives market and preserve market resilience, orderliness, competitive and fair markets, and the price-discovery function, adding that “major market disruptions hamper these efforts.”

The dispute is part of a broader fight over who controls event-contract markets. New York has argued that prediction markets such as Kalshi function as gambling platforms and should be subject to state gambling protections and enforcement. As James put it in CNN’s coverage of the July 31 suit: “New York’s gambling laws protect children from underage betting and help combat gambling addiction. No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.” On April 24, the CFTC and the U.S. Department of Justice sued New York in federal court, arguing that the Commodity Exchange Act preempts state gambling laws as applied to transactions on federally regulated designated contract markets.

Tuesday’s move is the second recent emergency action involving Kalshi. On July 14, the CFTC said it had also used emergency authority to stay a Kalshi rule change and direct the exchange to fulfill certain executed trades after a Michigan court order had sought to cancel them. Together, the back-to-back actions show the federal regulator stepping in repeatedly to keep a CFTC-supervised event-contract market operating while the jurisdictional fight with states intensifies.