US Tries to Override New York Gambling Laws, Orders Kalshi to Keep Operating

The Commodity Futures Trading Commission (CFTC) has compelled Kalshi to maintain its operations in New York, arguing that the state's lawsuit against the prediction market has created a "market emergency." The CFTC claimed their intervention aimed to ensure market stability and directed the exchange to adhere to the Commodity Exchange Act's Core Principles.

According to Ars Technica, the market emergency cited by the CFTC is the lawsuit filed by New York Attorney General Letitia James on July 31. James' lawsuit seeks a court order to permanently halt Kalshi from operating as an unlawful gambling business within the state. The lawsuit also demands full restitution to customers who have participated in betting and the payment of financial penalties.

New York aims to render event contract derivatives ineffective with its stringent gaming laws before the courts can issue final rulings, stated CFTC Chairman Michael Selig. Selig added that Congress did not intend for derivatives exchanges to be governed by a fragmented set of state gaming laws.

New York has no authority to regulate these interstate financial markets, Selig asserted. The commission is mandated by law to maintain order in these markets, and that is precisely what they have accomplished.

The CFTC asserts that it possesses the exclusive authority to regulate platforms like Kalshi and Polymarket under the Commodity Exchange Act, a US law granting the CFTC jurisdiction over designated contract markets (DCMs). These are financial exchanges that offer financial instruments and operate across state lines, matching bids from residents of one state with offers from residents of another state and submitting the trades to a clearinghouse that safeguards the transactions of customers nationwide.