The Commodity Futures Trading Commission on August 11 directed KalshiEX to continue performing its functions as a designated contract market in line with the Commodity Exchange Act’s core principles and its ordinary practices. The agency acted after the exchange notified it of a potential market emergency stemming from a New York lawsuit that seeks broad operational restrictions and substantial monetary relief.

Kalshi submitted its notice on August 1 following a complaint filed the previous day by New York Attorney General Letitia James. The state action alleges that the platform operates an unlicensed gambling business and requests a temporary restraining order that would prohibit it from offering event contracts within or from New York or to persons in the state. Because Kalshi’s principal place of business is in Manhattan, the requested relief could effectively halt the exchange’s ability to serve customers nationwide.

Scope of New York’s Claims

New York is seeking at least $36 billion in damages along with restitution, disgorgement of profits, triple-gains penalties, and $100,000 for each alleged unauthorized sports wagering offer. The petition treats Kalshi’s event contracts—covering sports, culture, elections and other outcomes—as illegal gambling activity subject to state law. The filing also cites the company’s reported valuation of approximately $22 billion and annualized trading volume of $178 billion.

Kalshi warned regulators that an immediate shutdown order could force liquidations of open positions and leave customers with unintended exposures in other markets. The CFTC determined that the threatened disruption qualified as a major market disturbance capable of preventing event-contract markets from accurately reflecting supply and demand.

Selig further stated that the state sought to make event-contract derivatives “waste away under its iron curtain of state gaming laws” before courts could issue final rulings. He argued that Congress designed the federal derivatives framework to govern exchanges that match bids and offers across state lines and clear trades centrally, rather than subjecting them to a patchwork of state gaming statutes.

Federal Assertion of Exclusive Jurisdiction

The CFTC invoked Section 8a(9) of the Commodity Exchange Act, which authorizes the agency to direct a registered entity to take action necessary to maintain orderly trading when it has reason to believe a market emergency exists. The order does not resolve the underlying legal merits of New York’s gambling claims or decide the preemption question. It simply requires Kalshi to keep operating under federal standards while litigation proceeds.

The agency maintains that federal law grants it exclusive jurisdiction over commodity derivatives, including event contracts traded on designated contract markets. It has filed lawsuits against nine states—Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin—to defend that position. The commission has also submitted amicus briefs in related appellate proceedings.

Prior Emergency Intervention and Court Divisions

This is not the first use of emergency authority in Kalshi’s state disputes. On July 14 the CFTC stayed an emergency rule the exchange had filed in response to a Michigan court order and directed Kalshi to fulfill existing trades involving Michigan residents rather than force-liquidate them. Officials said canceling already-executed contracts risked cascading effects across the marketplace and undermined contractual certainty.

Lower-court outcomes remain mixed. A Minnesota federal judge blocked a state prediction-market ban at the preliminary stage, while a New York federal judge in July declined to enjoin state gaming enforcement against Kalshi’s sports contracts. Separate proceedings in Michigan and Washington have produced restraints unfavorable to the exchange. Kalshi has removed the New York case to the U.S. District Court for the Southern District of New York, where questions of federal jurisdiction and interim relief remain pending.

The August 11 order leaves the ultimate resolution of federal-versus-state authority to the courts. It provides market participants assurance that a CFTC-registered exchange will continue operating under national rules while those questions are litigated.