- The CFTC invoked emergency authority to order prediction market Kalshi to continue operating, countering a New York state enforcement action.
- New York alleges Kalshi operates an illegal gambling business and seeks at least $36 billion in damages, while the CFTC claims federal law preempts state gaming statutes.
- The clash is part of a broader national legal dispute over whether the Commodity Exchange Act overrides state gambling laws for event contracts on regulated exchanges.
The US Commodity Futures Trading Commission (CFTC) invoked its emergency authority on Tuesday, ordering New York-based prediction market Kalshi to continue operating despite a state lawsuit. The CFTC said New York’s enforcement action and request for a temporary restraining order constituted a market emergency.
Consequently, the CFTC directed Kalshi to operate in accordance with its normal practices and the Commodity Exchange Act’s Core Principles. New York’s requested order would bar Kalshi from offering contracts tied to sports, culture, and elections within the state, but the CFTC argued it could prevent all nationwide offerings due to Kalshi’s New York base. According to the commission, New York seeks at least $36 billion in compensatory damages.
The CFTC stated the Commodity Exchange Act requires a uniform national derivatives market, with Chair Michael Selig arguing Congress did not intend a “patchwork of state gaming laws.” This confrontation is part of a broader fight over whether federal law preempts state gambling statutes for event contracts on regulated exchanges.
New York filed its lawsuit on July 31, alleging Kalshi runs an illegal gambling business through sports and election contracts. The state seeks restitution, disgorgement, and penalties, including triple Kalshi’s alleged gains. Meanwhile, a federal judge in a separate case denied Kalshi’s preliminary injunction on July 7, finding that state gambling laws were not preempted by the Commodity Exchange Act.
In a separate federal case, the CFTC sued New York in April to block state gambling laws from applying to registered contract markets. Judge Jed Rakoff denied the agency’s emergency request, finding insufficient likelihood of success. The latest CFTC order directs Kalshi to continue operating but does not resolve the underlying jurisdictional dispute, and the agency has sued eight other states alongside New York.
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