CFTC orders Kalshi to continue operating as New York seeks $36 billion in damages

New York wants to shut down Kalshi. The federal government says not so fast.

On July 31, 2026, New York Attorney General Letitia James and Governor Kathy Hochul filed a lawsuit against KalshiEX LLC, alleging the prediction market platform operates as an unlicensed gambling business in the state. The Commodity Futures Trading Commission responded by filing an emergency motion for a temporary restraining order in federal court, essentially telling New York to back off from a market the CFTC considers its own turf.

Kalshi remains operational as the legal fireworks play out.

The state’s case against Kalshi

New York’s lawsuit zeroes in on two main arguments. First, that Kalshi’s sports-event contracts are functionally indistinguishable from sports betting, which is heavily regulated at the state level. Second, that Kalshi lets 18-year-olds participate in those markets, undercutting New York’s requirement that sports bettors be at least 21.

New York is seeking to halt Kalshi’s operations entirely, reclaim profits from the platform, and impose fines that could reach into the tens of billions of dollars.

The New York Gaming Commission issued a cease-and-desist letter to Kalshi back in October 2025, signaling the state’s view that sports-event contracts fall squarely within its gambling enforcement authority. Kalshi apparently kept operating, and now the state has escalated to full litigation.

The CFTC draws a line

CFTC Chairman Michael Selig characterized the lawsuit as an attempt to “abruptly shut down prediction markets across the nation.”

The CFTC’s position rests on the federal Commodity Exchange Act, which the commission argues grants it exclusive jurisdiction over event contracts traded on designated contract markets. Kalshi has been a CFTC-designated contract market since it launched in 2021, which in the federal regulator’s view means states don’t get to unilaterally declare those same contracts illegal gambling.

Back in April 2026, the CFTC filed its own lawsuit against New York, seeking a permanent injunction to prevent the state from interfering with federally regulated prediction markets. The emergency motion filed in response to the July 31 lawsuit is an escalation of that existing case.

On July 14, 2026, the commission issued an order mandating Kalshi to honor specific open trades amid separate litigation in Michigan.

A fight about more than Kalshi

Kalshi introduced sports-event contracts in 2025, expanding beyond its original menu of political and economic prediction markets. That expansion is what triggered the conflict.

The age issue adds a consumer protection dimension to New York’s argument. Allowing 18-year-olds to trade sports-event contracts while requiring 21-year-olds for sports betting creates an inconsistency that state regulators point to as a gap in federal oversight.

What comes next

The immediate question is whether the federal court grants the CFTC’s emergency motion for a temporary restraining order against New York’s enforcement actions. If it does, Kalshi continues operating under federal protection while the broader jurisdictional dispute works its way through the courts. If it doesn’t, Kalshi could face an operational crisis in one of the country’s largest markets.

Similar legal disputes with other states are already in progress. A ruling that favors New York’s authority could embolden other states to pursue their own enforcement actions against prediction market platforms. A ruling that backs the CFTC’s exclusive jurisdiction claim could effectively preempt state gambling laws for any product traded on a federally designated exchange.

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