The CFTC isn’t taking any chances with New York.
On Tuesday, the Commodity Futures Trading Commission (CFTC) announced it had flexed its “emergency authority” to order Kalshi to continue doing business as usual.
That includes doing business in New York, where state officials are seeking to shut down the exchange’s prediction markets and extract severe financial penalties.
- The CFTC ordered Kalshi to keep its prediction markets running in New York despite the state’s efforts to shut them down.
- The federal agency declared an emergency, arguing that New York’s actions threaten its regulatory authority and financial markets.
- New York officials maintain that Kalshi is violating state gambling laws, setting up another potentially major federal-versus-state legal battle.
The CFTC’s order is in direct response to New York's lawsuit. According to the agency, its directive followed Kalshi asking the CFTC to review whether there was a “market emergency” in the wake of New York suing the prediction market operator on July 31.
Kalshi told the CFTC the following day that the potential temporary restraining order (TRO) could stop the company from offering event contracts from New York, where the company is headquartered. So, the CFTC is now stepping in, and perhaps sending a message to other states in the process.
“Under the Commission’s statutory emergency powers, it may direct Kalshi and its affiliates to continue to perform its functions as an exchange in accordance with the [Commodity Exchange Act's] Core Principles and its normal practices,” Tuesday’s order said. “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 commission noted that its order is only subject to review by a federal appeals court.
Tuesday's order is also similar to the one the CFTC recently issued in connection with another attempt to crack down on Kalshi, in Michigan. Yet the Michigan order came after a TRO had already been issued against Kalshi, and with the exchange operator putting restrictions in place in the state, making it a moot point.
.@CFTC Exercises Emergency Authority to Ensure Market Stability: https://t.co/FlXLiV3WPe
— CFTC (@CFTC) August 11, 2026
However, Tuesday's order came before New York obtained a TRO of its own. The threat of enforcement against Kalshi was enough for the CFTC to deem it an emergency situation, due to the “major market disturbance” the agency believes could ensue.
“Even though New York’s enforcement action has been removed to federal court and may be delayed by remand proceedings, the threat of 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 order said.
Stay off our turf
The CFTC's orders regarding Michigan and New York are rather extraordinary, given it is a power the agency has apparently used sparingly in its existence. Now it has used that authority twice in a month.
Yet the orders are in keeping with the CFTC’s recent stance on prediction markets and the efforts of states to crack down on those exchanges. It also signals that prediction markets have a friend in the agency, whose federal regulation they point to in trying to fend off state gambling regulators.
While a growing number of states see prediction markets as offering unauthorized, unlicensed, or unwanted sports betting, the CFTC sees a challenge to its regulatory turf. That has prompted the CFTC to sue nine states, which is in addition to all of the state-versus-prediction market litigation that has arisen over the past two years.
If New York’s lawsuit is allowed to continue, the CFTC claimed in Tuesday’s order, “then a single State will effectively become the nationwide regulator of event-contract swaps on DCMs.”
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Mind your business
The CFTC also claimed that if Kalshi is shut down by New York, there would be “swift and severe” consequences for the market. The agency pointed to examples like traders taking positions on the Federal Reserve's key interest rate, but notably nothing tied to sports, which is where prediction markets derive most of their trading volume.
However, given New York is seeking a temporary restraining order that would bar Kalshi from offering contracts tied to both sports and “other” events, the CFTC sees the lawsuit as pursuing a total ban on the company's event contracts.
“New York has no business regulating these interstate financial markets,” CFTC chairman Michael Selig added in a statement on Tuesday. “The Commission is required by law to ensure order in these markets, and that is what we have done today.”
As far as I can determine, the last time the CFTC exercised its emergency authority was in 1980 when President Carter announced an embargo on Soviet grain. Prediction-market law is the best. https://t.co/KbX3itUz39
— Rob Schwartz (@FormerCFTCGC) July 14, 2026
Kalshi, meanwhile, is in a position where its federal regulator is ordering it to continue business as usual in New York, where the governor and attorney general say that business as usual violates state gambling laws.
It remains to be seen how that will land with New York, which is still pursuing Kalshi in the courts over what it alleges is illegal sports betting and more.
“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Gov. Kathy Hochul said in the press release announcing the state’s lawsuit.
