CFTC Intervenes in Kalshi’s $36 Billion Legal Battle with New York

The CFTC’s directive, issued August 11, leverages Section 8a(9) of the Commodity Exchange Act to protect the exchange from a temporary restraining order sought by New York Attorney General Letitia James. In her July 31 lawsuit, James alleged that Kalshi functions as an unlicensed gambling operation, demanding at least $36 billion in damages and broad restrictions on the firm’s event contract business. Kalshi officials cautioned the commission that a shutdown would trigger forced liquidations of open positions and create significant financial exposure for its customers.

While New York asserts that its gambling statutes take precedence, the CFTC maintains exclusive jurisdiction over derivatives traded on registered exchanges. Chairman Michael Selig dismissed the state's regulatory claims, arguing that local authorities have no standing to govern interstate financial markets. The conflict highlights a deepening rift between federal regulators and state officials; while a federal judge in Minnesota recently blocked a state-level prediction market ban, a New York judge declined to halt gaming enforcement efforts against Kalshi earlier this summer. With the case now moved to the U.S. District Court for the Southern District of New York, the commission’s emergency order serves as a procedural shield to preserve market continuity while the broader question of federal preemption remains unresolved.