The Commodity Futures Trading Commission on August 11 ordered KalshiEX LLC to keep operating under federal exchange rules after New York Attorney General Letitia James sued the company over event contracts. The CFTC said New York’s July 31 case seeks a nationwide temporary restraining order and remedies the agency characterized as more than $36 billion.
The order does not decide whether Kalshi’s sports-linked markets are federally regulated derivatives, illegal gambling under New York law, or both. It does something narrower and more immediate: it tells a CFTC-registered designated contract market to continue operating while courts sort out who has authority over the contracts.
What did the CFTC order Kalshi to do?
In Release No. 9281-26, the CFTC said it exercised emergency authority after Kalshi notified the commission of a market emergency tied to James’s lawsuit. The agency ordered Kalshi “to continue to operate” in accordance with the Commodity Exchange Act’s core principles for designated contract markets.
That instruction matters because Kalshi’s federal status is central to its legal defense. Kalshi is not arguing that New York lacks gambling laws. It is arguing that its event contracts trade on a federally regulated derivatives exchange, and that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over trading on that exchange.
CFTC Chairman Michael S. Selig framed the order as a jurisdictional defense. In the August 11 release, Selig said New York has “no business regulating” interstate financial markets and argued that Congress did not intend derivatives exchanges to face a patchwork of state gaming laws. That is the commission’s position, not a court ruling on the merits of New York’s claims.
The emergency power cited by the CFTC, Section 8a(9) of the Commodity Exchange Act, lets the commission direct a registered entity to take action when the agency has reason to believe an emergency exists. The CFTC had invoked the same section less than a month earlier, on July 14, in a separate Kalshi-related dispute involving Michigan and pending trades.
Why did New York sue Kalshi?
New York’s case, People of the State of New York v. KalshiEX LLC, was filed July 31 and removed the same day to the U.S. District Court for the Southern District of New York as case No. 1:26-cv-06550, according to the federal docket. The state’s filing targets Kalshi’s event-contract business through New York gambling and consumer-protection theories.
The CFTC’s August 11 release says New York sought a temporary restraining order that would prohibit Kalshi from offering all event contracts nationwide. The agency also said the state’s requested relief added up to more than $36 billion.
That figure reflects the CFTC’s description of the state’s remedy theory, not a penalty already imposed. New York’s petition sought restitution, disgorgement, damages, civil penalties, treble gains, and a $100,000-per-offer penalty theory tied to allegedly unauthorized offers. The petition’s remedy formula is the basis for the CFTC’s larger dollar characterization.
The practical claim from New York is that sports-linked contracts can function as sports wagers when they let users take positions on game outcomes or related sports events. James’s office has treated that activity as subject to state licensing, tax, and consumer-protection rules, especially where New York law restricts who may offer sports betting and how those products may be marketed.
Kalshi’s position runs in the opposite direction. It says its products are event contracts listed on a CFTC-regulated exchange, not state-licensed sportsbook products. That distinction is the legal hinge for the fight, because a federal derivatives exchange and a state gambling operator sit under different regulators, different statutes, and different enforcement systems.
Is Kalshi legal in New York right now?
The answer depends on which proceeding is doing the work. Kalshi is operating under a CFTC emergency order, but it has not won a final ruling that New York gambling law is preempted as applied to its sports-event contracts. In a related case, KalshiEX LLC v. Williams, Judge Analisa Torres denied Kalshi’s request for a preliminary injunction against New York Gaming Commission officials on July 7.
Judge Torres’s July 7 opinion in case No. 1:25-cv-08846 found that Kalshi had not shown a likelihood of success on its preemption argument at the preliminary-injunction stage. The court also weighed New York’s interest in enforcing its gambling laws against Kalshi’s claimed harm and denied temporary relief. Kalshi appealed that ruling to the Second Circuit.
That earlier decision is why the August 11 CFTC order is more than a routine agency statement. The CFTC is now directing Kalshi to keep operating at the same time New York is trying to enforce gambling laws against the company through a separate state-filed action. The two tracks have not been reconciled by a final appellate ruling.
The federal docket in People v. KalshiEX shows that Kalshi removed New York’s July 31 case to federal court. New York then moved to send it back to state court, and Kalshi opposed that move. The remand fight is before Judge Vernon S. Broderick.
What is the CFTC’s broader strategy?
The CFTC is trying to establish that prediction-market contracts listed on registered derivatives exchanges cannot be regulated state by state as gambling products. In its August 11 release, the agency said it has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin to protect the jurisdiction Congress gave it.
The commission also said it has filed amicus briefs in the Sixth Circuit, the Ninth Circuit, and the Massachusetts Supreme Judicial Court. That is a broad litigation campaign by a federal market regulator, not a dispute limited to one exchange or one state attorney general.
Courts have not spoken with one voice. In New York, Judge Torres denied Kalshi preliminary relief against state enforcement. In Nevada, the Ninth Circuit on August 28 affirmed in part a district court order dissolving Kalshi’s preliminary injunction as to sports-related event contracts, according to the published opinion in KalshiEX LLC v. Assad. Other district courts have reached different results in other states.
That uneven record matters for the industry. Kalshi’s business model depends on national liquidity and uniform access across jurisdictions. State gambling regulators, by contrast, license and police sports betting within state borders. The more sports-event contracts resemble bets to state officials, the harder it becomes for prediction markets to avoid sportsbook-style enforcement fights.
What does the $36 billion figure mean?
The $36 billion number should not be read as a fixed fine, an awarded judgment, or a single damages figure already accepted by a court. The CFTC’s August 11 release says New York seeks more than $36 billion, while New York’s petition describes a set of requested remedies that includes restitution, disgorgement, treble gains, damages, civil penalties, and per-offer penalties.
The size of that remedy theory still matters. It signals that New York is not treating Kalshi’s operation as a minor licensing dispute. The state is asking a court to stop the activity and impose financial consequences based on the premise that Kalshi’s offers were unlawful in New York.
For Kalshi, the theory threatens more than one state market. If New York can treat federally listed sports-event contracts as illegal gambling, other large states could try the same route. If the CFTC’s view prevails, state gaming regulators would have a narrower role when a CFTC-regulated exchange lists event contracts that overlap with sports outcomes.
What happens next?
The immediate procedural question in People v. KalshiEX is whether Judge Broderick keeps New York’s case in federal court or sends it back to state court. That remand decision will shape where New York’s request for injunctive and monetary relief is litigated, but it will not by itself settle the national preemption question.
The next dated milestone in the related federal enforcement track is September 14, 2026, when Judge Lorna G. Schofield is set to hear the preliminary-injunction fight in United States v. State of New York, case No. 1:26-cv-03404. Until then, Kalshi is operating under the CFTC’s August 11 emergency order while New York continues to press its gambling-law case.
