CFTC Emergency Order Directs Kalshi to Continue New York Operations Despite State Suit

The Commodity Futures Trading Commission (CFTC) issued an emergency declaration directing Kalshi to continue operating in New York, overriding state orders to stop. The move answers Kalshi’s petition for relief after it failed to block enforcement of gaming laws in federal court. It responds directly to a $36 billion lawsuit filed by New York Attorney General Letitia James.

The declaration marks only the second time the CFTC has used this power since 1980. The first instance came when the agency ordered Michigan to stand down from similar demands that Kalshi cease operations there. The order states that New York’s enforcement action and temporary restraining order motion constitute an emergency because they amount to a major market disturbance preventing accurate reflection of supply and demand for event contracts.

Chairman Selig’s Statement on State Authority

Michael Selig, CFTC chairman, said the commission is required by law to ensure order in financial markets. Selig criticized New York’s moves as part of an iron curtain of state authority over derivatives.

“New York intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings,” Selig said. “Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws.”

The declaration focuses on contracts with financial, economic, and commercial consequences, such as positions on Federal Open Market Committee moves for the Federal Funds Rate, traffic levels in the Strait of Hormuz, crypto asset prices, state droughts, and recession timing. It largely sets aside sports contracts that have driven most state-level challenges. Kalshi had warned that a temporary restraining order would shut down its entire derivatives clearing merchant operation, force customer refunds, and require disgorgement of completed trade profits.

The Federal-State Court Test Ahead

This action sets up another test of state versus federal authority, with New York able to appeal to the Second Circuit or DC Circuit Court of Appeals. Selig’s reasoning tracks closely with a Minnesota federal ruling last month by Judge Katherine Menendez. That decision blocked Minnesota from enforcing its ban on all prediction markets, citing CFTC exclusive jurisdiction over swaps on designated contract markets and noting that not every event contract qualifies.

According to reporting by SBC Americas, the CFTC order does not resolve underlying jurisdictional questions. It maintains the status quo pending further litigation while highlighting potential swift and severe market consequences from shutdowns. New York has not yet responded publicly to the emergency declaration.

Reporting: SBC Americas

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