The U.S. Commodity Futures Trading Commission (CFTC) has invoked emergency powers to order prediction-market operator, Kalshi, to continue operating escalating a legal dispute with New York over whether the platform’s event contracts constitute illegal gambling.

The CFTC said it acted after Kalshi notified the agency of a market emergency stemming from a lawsuit filed by New York Attorney General, Letitia James. The agency directed KalshiEX LLC, which operates the platform, to continue its operations in accordance with the Commodity Exchange Act’s core principles.

New York sued Kalshi in July 2026 seeking a temporary restraining order that would prevent the company from offering event contracts tied to sports, elections, culture and other events in the state. The state is also seeking at least $36 billion in compensatory damages, according to the CFTC.

 

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The dispute centers on a broader regulatory question over whether prediction markets should be treated as federally regulated financial markets or as gambling activities subject to state laws.

Kalshi operates as a designated contract market under CFTC oversight and argues that its event contracts fall under federal commodities law. New York, meanwhile, argues that the contracts amount to unlicensed gambling and should be regulated under state law.

The CFTC’s intervention marks another escalation in the conflict between federal and state authorities over prediction markets, an industry that has expanded rapidly as platforms have offered contracts tied to sports, politics, economic data and other real-world events.

 

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The agency previously used emergency authority in July 2026 to order Kalshi to fulfill pending trades after a Michigan court order directed the company to cancel certain contracts involving Michigan residents.

The latest action underscores the regulatory uncertainty facing prediction-market operators as states increasingly challenge their activities under gambling laws while the CFTC seeks to assert federal jurisdiction over the contracts.

The outcome could have implications beyond Kalshi, potentially determining how prediction markets operate across the United States and the extent to which state gambling regulators can intervene in federally regulated markets.

 

 

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