The Commodity Futures Trading Commission invoked emergency powers on August 11 to order Kalshi to keep trading nationwide, overriding a New York lawsuit that sought to shut the exchange down. Six days earlier, a federal judge in Utah rejected the specific legal theory the CFTC’s order depends on: that Kalshi’s federal registration puts its event contracts beyond the reach of state gambling law.
What the CFTC Ordered
.@CFTC Exercises Emergency Authority to Ensure Market Stability: https://t.co/FlXLiV3WPe
— CFTC (@CFTC) August 11, 2026
KalshiEX notified the CFTC of a market emergency after New York Attorney General Letitia James sued the exchange in state court. The CFTC responded by ordering Kalshi to continue operating in accordance with the Commodity Exchange Act’s Core Principles.
“New York intends to make event contract derivatives waste away under its iron curtain of state gaming laws before the courts get the chance to issue final rulings,” Selig said.
He argued that Kalshi and similar exchanges operate across state lines, matching buyers and sellers in different states and routing trades through a national clearinghouse, and that state gaming laws were never built to govern them.
The Ruling That Undercuts It
Selig’s argument rests on a premise: that Kalshi’s status as a CFTC-registered exchange preempts state authority over its contracts. That premise lost in federal court six days before the CFTC’s order.
On August 5, Judge Robert Shelby of the U.S. District Court for the District of Utah ruled that Kalshi’s federal registration does not shield its sports event contracts from Utah’s gambling laws. Shelby wrote that the Commodity Exchange Act “does not preempt Utah’s ability to criminalize gambling within its borders”.
A Split Record, Not a Settled One
In April, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction letting Kalshi keep offering event contracts over New Jersey’s objections, the first federal appellate ruling on the question.
Nevada’s courts have gone back and forth on the same issue. Four months after winning in the Third Circuit, Kalshi lost the identical argument in Utah. The preemption question the CFTC’s order treats as settled is still being litigated, with different courts reaching different answers.
| Jurisdiction / Court | Date | Key Ruling | Result for Kalshi |
|---|---|---|---|
| Third Circuit / New Jersey | April 6, 2026 | The court found federal preemption supported Kalshi’s preliminary injunction against New Jersey’s gambling restrictions. | Kalshi won |
| District of Nevada | March 2, 2026 | The court found the CEA did not completely preempt Nevada’s state-law claims for purposes of federal jurisdiction. | Remanded to state court |
| District of Utah | August 5, 2026 | Judge Robert Shelby rejected Kalshi’s argument that federal law preempts Utah’s gambling restrictions. | Kalshi lost |
| New York | July 31, 2026 | New York sued Kalshi, arguing its sports event contracts constitute unlawful gambling under state law. | Pending |
The courts have reached different conclusions on Kalshi’s preemption argument, leaving the broader question of state authority over federally regulated prediction markets unresolved.
What New York Is Suing Over
New York’s petition, filed July 31 in the Supreme Court of the State of New York, New York County, seeks a temporary restraining order barring Kalshi from offering event contracts nationwide and more than $36 billion in damages under Executive Law Section 63(12).
James’s office argues Kalshi operates without a gaming license, avoids the taxes licensed gambling operators pay, and allows users as young as 18 to trade on sports outcomes, three years below the state’s gambling age minimum.
“No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple,” James said.
Governor Kathy Hochul said Kalshi “has chosen to ignore New York’s gaming laws, which exist to protect consumers.”
Kalshi’s Defense
Kalshi has compared itself to a stock exchange rather than a casino. CEO Tarek Mansour has argued that Kalshi matches trades between users and collects a transaction fee, the same function Nasdaq performs, and that New York’s legal theory could just as easily be pointed at a registered securities exchange.
Kalshi Head of Communications Elisabeth Diana said in a statement that “states can’t just shut down a federally licensed exchange” and that doing so “would also hurt New Yorkers, who would be driven offshore.” Mansour has also said gambling industry lobbying is behind New York’s suit.
Nine States, One Fight
New York is one of nine states the CFTC has sued to defend its jurisdiction over Kalshi and similar exchanges, along with Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island and Wisconsin. The commission has also filed amicus briefs in the Sixth and Ninth Circuits and before the Massachusetts Supreme Judicial Court.
The CFTC’s order keeps Kalshi trading in New York for now, but it does not resolve the legal question underneath the lawsuit. New York’s request for a nationwide restraining order and its $36 billion damages claim are still pending in state court. The same preemption argument that failed in Utah is the one the CFTC is currently relying on elsewhere. FlightAware is challenging Kalshi’s use of its flight data and trademarks in airport cancellation prediction markets.
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