The US Commodity Futures Trading Commission has invoked emergency powers and ordered Kalshi to continue operating under federal derivatives-market rules as its dispute with New York escalates.
The intervention follows New York’s July 31 lawsuit against the prediction market operator, which Global Gambling News previously reported.
Kalshi notified the CFTC of a market emergency after New York Attorney General Letitia James sought court action against the federally regulated exchange.
The CFTC responded on August 11 by exercising its emergency authority and directing Kalshi to continue operating in accordance with the Commodity Exchange Act’s Core Principles.
New York is seeking to prevent Kalshi from operating as an unlicensed gambling business, arguing that its sports and other event contracts fall within state gambling laws despite the company’s federal regulatory status.
The CFTC said the state action includes a request for a temporary restraining order that could prevent Kalshi from offering event contracts nationwide and seeks more than US$36bn in damages.
New York’s court filing also seeks restitution, disgorgement and penalties equal to three times Kalshi’s alleged gains from unlawful activity.
It is additionally seeking a $100,000 penalty for each unauthorised offer or attempted offer of sports wagering in the state.
The dispute centres on whether federally regulated event contracts should fall exclusively under commodities law or can also be regulated as gambling by individual US states.
CFTC chairman Michael Selig said: “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws.
“These are financial exchanges that offer financial instruments and operate across state lines.”
Selig said New York had “no business regulating these interstate financial markets” and that the CFTC was required to protect the orderly functioning of federally regulated exchanges.
New York maintains that Kalshi’s products meet the legal definition of gambling because customers risk money on uncertain future events outside their control.
James said when announcing the state action: “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”
New York also argues that Kalshi operates without a state gambling licence, does not pay the taxes imposed on licensed sportsbooks and allows customers aged 18 to 20 to access products despite the state’s minimum sports betting age of 21.
The CFTC intervention does not resolve the underlying jurisdictional dispute.
A federal court rejected Kalshi’s request for preliminary protection against New York enforcement in July, finding at that stage that the company had not demonstrated that federal commodities law pre-empted state gambling legislation.
Kalshi has appealed that decision.
The CFTC has meanwhile expanded its own legal campaign against state intervention, filing lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.
It has also filed legal briefs in prediction market disputes before federal appeals courts and the Massachusetts Supreme Judicial Court.
The emergency order marks a significant escalation in the battle over prediction markets, moving the dispute beyond individual operators challenging state regulators to a direct confrontation between the federal derivatives regulator and US gambling authorities.
The eventual outcome could determine whether sports event contracts can continue to be offered nationally through federally regulated exchanges without separate approval from individual states.
