CFTC orders Kalshi to keep operating amid New York legal challenge

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CFTC orders Kalshi to operate

Highlights

Commodity Futures Trading Commission uses emergency authority to direct Kalshi to continue operating despite New York lawsuit seeking a temporary restraining order.
New York Attorney General Letitia James sues Kalshi alleging illegal gambling, seeking at least $36 billion in restitution, disgorgement, and civil penalties.
CFTC maintains broad statutory authority over prediction markets and launches rulemaking as operators like Kalshi and Polymarket achieve multibillion-dollar valuations and support federal oversight.

CFTC intervention in Kalshi dispute

The Block reports that the Commodity Futures Trading Commission on Tuesday uses its emergency authority to direct Kalshi to continue operating, after the prediction market platform faces a lawsuit from New York filed in July.

CFTC Chair Michael Selig says in a statement that New York should not regulate interstate financial markets and that the commission is legally required to maintain order in those markets. The agency says Kalshi contacted it the day after the lawsuit and warned that an imminent market emergency would result if a temporary restraining order were issued.

New York Attorney General Letitia James sues Kalshi, alleging that the company operates an illegal gambling business. Her office seeks a temporary restraining order to stop Kalshi from operating in New York, along with restitution for users, disgorgement of profits and civil penalties that the lawsuit says could total at least $36 billion.

Regulatory stakes for prediction markets

The New York attorney general argues that prediction markets meet the legal definition of gambling and says Kalshi exposes New York residents, including people under the state's legal gambling age of 21, to serious personal and financial risk. The lawsuit also alleges that Kalshi avoids paying applicable taxes.

Over the past year, the CFTC sues New York, Illinois, Arizona and Connecticut, among others, as it pushes for exclusive jurisdiction over federally registered prediction markets, especially in sports betting. Selig also launches a rulemaking process and maintains that the agency's statutory authority is broad enough to regulate the industry, even as states argue that such platforms violate local gaming and gambling laws.

Prediction market operators including Kalshi and Polymarket continue to gain popularity and reach multibillion-dollar valuations. Both companies support CFTC oversight of their businesses, underscoring the commercial significance of the jurisdictional fight.

Our earlier coverage of state election betting bans and prediction markets explained that at least 23 states restrict election wagering, but it remains unclear whether those prohibitions apply to trades placed on event-contract platforms. The piece outlined the ongoing clash between state authorities and the CFTC over who has jurisdiction, leaving operators such as Kalshi and Polymarket in legal limbo ahead of the midterms.

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