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The Commodity Futures Trading Commission has ordered Kalshi to continue operating after the exchange declared a market emergency tied to New York’s attempt to stop its prediction markets.
The CFTC exercised emergency authority on August 11 and directed Kalshi to continue performing its exchange functions under its normal practices and the Commodity Exchange Act’s Core Principles.
New York Seeks at Least $36B in Damages From Kalshi
New York Attorney General Letitia James sued Kalshi on July 31, alleging that the CFTC-regulated exchange operates an illegal, unlicensed gambling business by offering contracts on sports, elections, culture and other events.
The state seeks injunctions, restitution, disgorgement, damages and civil penalties. Its petition also seeks a penalty equal to three times Kalshi’s alleged gains and $100,000 for each unauthorized offer or attempted offer of sports wagering in New York.
The CFTC’s emergency order says New York is seeking at least $36 billion in compensatory damages pending an accounting, excluding punitive damages and costs.
CFTC Says New York Restraining Order Could Shut Kalshi Nationwide
New York has also sought a temporary restraining order barring Kalshi from operating a business offering event contracts “within or from New York or to persons in New York.” Because Kalshi’s principal place of business is in New York, the CFTC argues that the requested order could effectively prevent the exchange from offering event contracts anywhere.
Kalshi notified the commission on August 1 that the threatened shutdown created a market emergency. The CFTC concluded that the enforcement action risked disrupting orderly trading and directed the exchange to continue operating.
Chairman Michael Selig said Congress did not intend federally regulated derivatives exchanges to operate under a patchwork of state gambling laws.
CFTC Order Keeps Kalshi Operating While Jurisdiction Fight Continues
The CFTC had already sued New York in April over the state’s attempts to apply gambling laws to CFTC-regulated event-contract markets. It has filed similar actions involving Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island and Wisconsin.
Kalshi removed New York’s July 31 case to federal court, and the state has filed a motion seeking to return it to state court. That remand dispute remains pending.
The August 11 emergency order does not resolve whether New York can enforce its gambling laws against Kalshi. It requires the exchange to continue operating while the broader federal-state jurisdictional dispute remains before the courts.
