The Commodity Futures Trading Commission has ordered Kalshi to keep its markets running after the exchange declared a market emergency tied to New York's enforcement campaign. The order comes just weeks after New York Attorney General Letitia James filed a lawsuit on July 31 alleging Kalshi offers sports prediction markets without a license from the New York State Gaming Commission.
Why the CFTC stepped in
Kalshi had declared a market emergency, a move that typically allows an exchange to halt trading. But CFTC Chairman Michael Selig rejected New York's approach, arguing that states should not regulate interstate financial markets. Congress, he said, did not intend a patchwork of state gambling laws to govern what is a national market.
The CFTC has already filed lawsuits against several states, including Arizona, Connecticut, Illinois, New York, Rhode Island, and Wisconsin, and has submitted amicus briefs in related cases. The agency's position is clear: event contracts fall under federal oversight, not state gaming rules.
What New York wants
New York is seeking to force Kalshi to surrender gains, provide restitution to consumers, and pay penalties equal to three times the gains. The numbers are staggering. Kalshi is seeking a valuation of about $40 billion, and the lawsuit could expose the exchange to more than $36 billion in damages.
That gap between valuation and potential liability is the crux of the fight. If New York wins, Kalshi's business model in the state collapses. If the CFTC prevails, states lose their ability to police these markets.
The city council's separate probe
Meanwhile, New York City Council Speaker Julie Menin has sent letters to Kalshi, Polymarket, Coinbase, and Gemini Titan seeking information about their marketing practices for event contracts. The council is examining allegations of deceptive marketing, including undisclosed influencer promotions and fabricated depictions of profitable trades, particularly targeting younger consumers.
That inquiry runs parallel to the state lawsuit, but it's a different front. The council isn't asking about licensing; it's asking about how these platforms sell their products. Whether that leads to new city rules or just public pressure remains open.
The CFTC's order keeps Kalshi trading for now, but the legal battle is far from over. The exchange faces a state lawsuit, a federal agency defending its turf, and a city council demanding answers. The question now is whether Kalshi can hold its $40 billion valuation while fighting a $36 billion damages claim in court.
