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The Commodity Futures Trading Commission has stepped in, using its emergency powers to keep prediction market operator Kalshi active in New York despite a state lawsuit.
The agency said New York’s push for a temporary restraining order amounted to a “market emergency” and directed Kalshi to continue operating under its normal practices and the Commodity Exchange Act’s Core Principles.
New York’s request would have barred Kalshi from offering contracts tied to sports, culture, elections, and other events to anyone in the state, or from its New York base. Kalshi asked the commission to review the situation after being sued on July 31, warning that the restraining order could cripple its business.
According to the CFTC’s Tuesday release, such a move could have shut down all event contracts nationwide. State officials are also seeking at least $36 billion in damages.
“The Commission finds that New York’s enforcement action and TRO motion constitute an emergency because they constitute a “major market disturbance which prevents the market from accurately reflecting the forces of supply and demand” with respect to event contracts,” the order stated.
“Under the Commission’s statutory emergency powers, it may direct Kalshi and its affiliates to continue to perform its functions as an exchange….This exercise of the Commission’s emergency authority will give market participants the necessary assurances that a CFTC-registered [designated contract market] cannot be shut down by a single State and that the trades they execute will be duly cleared and fulfilled.”
The CFTC also made it clear that only a federal appeals court can review its directive.
Kalshi has now received executive order backing in two states
The CFTC has now stepped in twice within a month to shield Kalshi from state crackdowns, first in Michigan and now in New York.
In Michigan, the commission acted after a temporary restraining order had already been issued, meaning Kalshi had already restricted its operations there. The New York order, however, came before any TRO was granted, with the agency saying the threat alone was enough to trigger a “major market disturbance.”
The commission explained that “the sudden, unpredictable shut down of a designated contract market poses an existential threat to the Commission’s registrants, marketplaces, and regulatory jurisdiction, as well as to the individuals and entities that trade in the Commission’s regulated marketplaces, and thus justifies exercise of the Commission’s statutory emergency power.”
The last time the CFTC used its emergency powers before prediction markets was in the 80s, making these back‑to‑back orders unusual. They also show the agency’s determination to defend prediction markets against state regulators, positioning federal oversight as the ultimate authority.
The commission has already filed suits against nine states, warning that if New York’s case goes forward unchecked, “a single State will effectively become the nationwide regulator of event‑contract swaps on DCMs.”
“Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws,” CFTC Chairman Michael S. Selig stated on Tuesday. “New York has no business regulating these interstate financial markets. The Commission is required by law to ensure order in these markets, and that is what we have done.”
NYC goes after Kalshi’s marketing practices in separate battle
While the legal fight between New York State, the CFTC, and Kalshi continues, the New York City Council has opened a new front by targeting the company’s marketing.
According to the Wall Street Journal, Council Speaker Julie Menin sent letters on August 11 to Polymarket, Kalshi, Coinbase, and Gemini Titan, demanding answers about how they comply with consumer protection laws.
In her letter to Polymarket’s chief executive Shayne Coplan, Menin raised concerns over promotional videos that appeared to show fake trades and even promoted insider activity on social media.
“Troubling news reports allege that Polymarket conspired with marketing agents and social media influencers to target young adults, and thus potentially minors, with false, deceptive, and unconscionable advertising,” Menin wrote.
The Council’s letters included more than 60 questions, ranging from how much revenue the companies generate in the city to how many of their users are local residents. The firms were given 14 days to respond.
While the Council cannot bring criminal charges, it does have subpoena power to force disclosure of documents.
Menin also said legislation was being considered to strengthen enforcement, expand public education, and introduce health measures around prediction markets.
This city‑level probe comes just a week after New York Attorney General Letitia James filed suit against Kalshi, accusing it of running an illegal gambling app.
