CFTC Asserts Emergency Powers to Counter New York Shutdown Threat Against Kalshi

The CFTC has stated it retains authority to direct Kalshi to continue operations even if a New York court orders the exchange to cease activity. In a letter published Tuesday, the agency responded to a state lawsuit filed last month after a federal court declined to shield the company from New York’s claims.

New York seeks a temporary restraining order prohibiting Kalshi from offering contracts on sports, culture, elections and other events within or from the state or to persons there. The requested relief includes a $36 billion fine calculated at three times gains plus $100,000 for every bet placed from within the state. That sum exceeds Kalshi’s total fee revenue across its history of under $2 billion, while its most recent funding round valued the company at $22 billion.

CFTC Chair Michael Selig described the lawsuit as an effort to dismantle the event contract industry before courts can rule. “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,” he added.

Legal Basis and Market Disruption Risks

The CFTC letter argues that a shutdown order would create a major market disturbance by preventing accurate reflection of supply and demand in event contracts. Such action threatens the agency’s registrants, marketplaces and jurisdiction, justifying emergency powers under the Commodity Exchange Act. The agency warned that one state’s order could effectively regulate event-contract swaps nationwide on designated contract markets, contrary to the federal framework Congress designed.

A shutdown would also trigger an influx of trading to other exchanges, artificially affecting prices unrelated to underlying events, plus force liquidation of open positions. The CFTC stated it could direct Kalshi to keep performing exchange functions per core principles if the order takes effect. Nevada, Washington and Michigan have imposed similar restrictions on Kalshi’s sports contracts. The state-court case now sits on hold as Kalshi seeks removal to federal court, a step it has not cleared in prior disputes.

Jurisdictional Limits in Federal Derivatives Oversight

This dispute exposes the tension when state gaming enforcement collides with CFTC oversight of designated contract markets. While New York’s move highlights legitimate concerns over certain event contracts, the agency’s response prioritizes uniform national regulation to avoid pricing distortions and fragmented authority. As the matter returns to state proceedings under an expedited special process, the CFTC’s stance may limit single-state veto power but leaves unresolved exactly where event contracts end and gaming begins. Market participants should track whether federal emergency intervention sets a durable precedent or invites further challenges from additional states.

Reporting: Yogonet International

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