CFTC orders Kalshi to keep operating in New York during state lawsuit

The CFTC Kalshi New York order directs the prediction-market operator to keep serving customers in the state while New York’s lawsuit against the company proceeds. The immediate result is that Kalshi can continue operating in New York for now, but the federal action does not settle the fight over whether sports-related event contracts fall under federal derivatives rules or state gambling law.

The Commodity Futures Trading Commission invoked emergency authority on Aug. 11 and instructed Kalshi to continue operating in New York, according to Bloomberg and CoinDesk. CoinDesk reported that Kalshi requested the agency’s help after New York Attorney General Letitia James filed suit against the company at the end of July.

For users of the platform, the order means the state case has not immediately stopped access to Kalshi’s markets. The longer-term legal question remains open, including which regulator has authority over the products.

Why did the CFTC order Kalshi to keep operating in New York?

The CFTC says it has exclusive jurisdiction over registered entities including Kalshi, which offers event contracts tied to outcomes such as sports games and elections, Bloomberg reported. The agency regards those contracts as federally regulated derivatives, or financial contracts whose value is tied to an event or underlying outcome.

CFTC Chairman Mike Selig said Congress did not intend derivatives exchanges to face a patchwork of state gaming rules, according to CoinDesk. In remarks reported by the outlet, Selig described Kalshi’s markets as interstate financial venues because they can match an order from one state with an order from another and clear the transaction centrally. That is the chairman’s and agency’s position, rather than a final court ruling on the issue.

What does New York allege against Kalshi?

New York sued Kalshi on July 31, alleging that its sports prediction markets violate state gambling laws, CoinDesk reported. The state also said Kalshi had not obtained a license from the New York State Gaming Commission.

The case reflects a broader disagreement over prediction markets. States have argued that sports-related markets amount to gambling and belong under state regulation. The CFTC maintains that prediction markets offer federally regulated swaps and therefore fall under federal oversight.

Kalshi sought to transfer the New York case to federal court, while New York asked that it be returned to state court. CoinDesk reported that both venue motions were awaiting a judge’s decision.

What has been decided, and what remains unresolved?

• Decided for now: The CFTC has directed Kalshi to continue operating in New York.
• Still unresolved: Whether New York can enforce its gambling laws against Kalshi’s sports-related markets.
• Also pending: Whether the lawsuit will proceed in federal or state court.

This is not the CFTC’s first intervention involving Kalshi and a state dispute. In Michigan, the agency previously tried to support Kalshi after a state-court ruling affecting trades, though CoinDesk reported that Kalshi had already unwound the trades required by that court. The New York action extends the same federal-versus-state clash, with the merits still to be decided in court.

This story draws on original reporting from Decrypt.