CFTC orders Kalshi to stay open amid $36B New York suit

On Aug. 11 the Commodity Futures Trading Commission directed KalshiEX LLC to continue operating under the Commodity Exchange Act’s Core Principles after the exchange declared a market emergency linked to New York’s enforcement actions.

The CFTC said New York is seeking temporary relief that could bar Kalshi from offering event contracts nationwide and expose the exchange to more than $36 billion in alleged damages. New York Attorney General Letitia James filed a lawsuit on July 31 alleging Kalshi operates sports prediction markets without a license and is avoiding licensing, tax and consumer-protection obligations that apply to regulated casinos and sportsbooks. The state asked a court to require Kalshi to surrender gains tied to the alleged violations, provide consumer restitution and pay penalties equal to three times those gains.

The agency said intervention was needed to prevent disruption to clearing, trading and price discovery on a federally regulated exchange and to preserve a uniform national derivatives market. CFTC Chairman Michael Selig wrote that New York was attempting to make federally regulated event-contract derivatives “waste away under its iron curtain of state gaming laws,” and argued Congress did not intend those markets to be governed by a patchwork of state rules.

The regulator has filed lawsuits or appeared in cases involving prediction markets and state law in several jurisdictions, including Arizona, Connecticut, Illinois, Rhode Island and Wisconsin. The emergency order preserves Kalshi’s operations while courts consider whether federal derivatives law preempts state gambling and licensing rules.

New York City officials have expanded scrutiny of prediction markets beyond the attorney general’s lawsuit. City Council Speaker Julie Menin said the Council has been examining allegations of misleading and deceptive marketing and sent letters to Kalshi and other platforms seeking information about promotion of contracts tied to sports, politics, culture and weather. Menin described concerns about undisclosed influencer promotions and ads that portray trades as reliably profitable, and the Council plans a hearing to review consumer-protection measures.

Regulatory pressure has not halted Kalshi’s growth. The company is reportedly in advanced talks for a Series G financing that could value it at about $40 billion, up from a $22 billion valuation in May. Kalshi reported rapid revenue growth: annualized revenue exceeded $4 billion in July, up from more than $2 billion two months earlier. The platform processed about $27 billion in trading during the World Cup and drew roughly 3 million users; trading over the most recent 30 days totaled about $11 billion.

The legal dispute leaves open which contracts Kalshi can offer without state licenses. The CFTC order keeps the exchange open while courts consider whether federal oversight of derivatives exchanges limits states’ ability to apply gambling laws to event contracts.