CFTC Kalshi New York Order: State Fight Isn't Over

The order, signed by CFTC Chair Michael Selig on Aug 11, tells Kalshi to keep offering its federally regulated event contracts under normal CFTC Core Principles, treating the exchange as if New York's state action doesn't change its obligations. It leans on Section 8a(9) of the Commodity Exchange Act, a stay-and-continuity power the agency last used in 1980 and has invoked only six times ever, twice in the past month alone.

Crucially, the order is narrow. It does not declare that federal law preempts New York's gambling statutes, and it doesn't ask a court to block the state's lawsuit. It's the CFTC exercising its own supervisory authority over a company it regulates, effectively saying: as far as we're concerned, you're still open for business. Whether New York has to accept that is a separate legal question the order doesn't answer.

For now, yes, the state's case is very much alive. James and Governor Kathy Hochul sued Kalshi on July 31 in New York Supreme Court, seeking to bar it from operating in the state and reportedly pursuing damages built from restitution and disgorgement of Kalshi's New York gains, a treble-damages penalty, and a $100,000 fine for every unauthorized sports-wagering offer — layered on an argument that Kalshi dodged the roughly 51% tax rate licensed sportsbooks pay, the combination behind that eye-catching $36 billion figure. A temporary restraining order motion is part of that filing, and a hearing is expected in the coming weeks, though an exact date isn't public yet.

The CFTC order gives Kalshi political and regulatory cover, and a talking point in court, but it doesn't strip a state court of jurisdiction over a state-law claim. If the judge grants New York's TRO, Kalshi faces a genuine conflict: a state court order to stop, and a federal regulator telling it to continue. That collision, not the Aug 11 order itself, is the moment that would actually force a preemption ruling.

The repeat use of Section 8a(9) is the more telling signal here. Selig first invoked it on July 14, in a dispute tied to Michigan, then again less than a month later for New York. Two invocations in 30 days, after 46 years of the power sitting unused, reads as a deliberate campaign to protect Kalshi's national footprint, not a one-off emergency response to a single aggressive state.

That pattern matters more than any single order's legal text. It signals the CFTC sees prediction-market jurisdiction as a fight worth fighting repeatedly and aggressively, likely because losing state by state would fragment a product Kalshi and the CFTC both want treated as uniformly federal. It also raises the odds this power gets reviewed by a federal appeals court, since an order can be challenged even if it isn't itself a final ruling.

Kalshi's state-by-state legal record is genuinely mixed, which is why this keeps ending up in court rather than getting settled by fiat. The Third Circuit affirmed a Kalshi win in New Jersey, backing its federal-preemption argument. A federal judge in Minnesota sided with Kalshi, blocking the state's prediction-market ban as likely preempted by federal law. Maryland went against Kalshi outright. Nevada's courts reversed an earlier ruling in Kalshi's favor. New York, with the largest and most politically backed opposition yet, is now the newest front.

Conflicting outcomes across circuits are exactly the setup that eventually pulls in the Supreme Court, because lower courts disagreeing on the same federal question is close to the textbook trigger for granting review. That process takes months to years, not weeks. Congress could shortcut it: the CLARITY Act, a market-structure bill that would clarify federal jurisdiction over products like this, has a Senate cloture vote targeted for Sept 15. But it's currently short of the 60 votes needed, so courts remain the only venue actually moving right now.

The realistic base case is that Kalshi keeps operating in New York through the TRO fight, leaning on the CFTC's backing and its Third Circuit precedent from New Jersey. But the Aug 11 order itself resolves nothing structurally. New York's case proceeds independently, and the underlying question of whether federal law overrides state gambling law most likely gets decided months or years out, either through federal appeals courts or, if it clears the Senate, through Congress.

The bull case for Kalshi is that repeated CFTC backing plus its New Jersey and Minnesota wins build enough momentum for a nationwide preemption ruling that ends the state fights for good. The bear case is that New York's uncapped damages theory and governor-level political backing make it the toughest opponent yet, and that a federal appeals court reviewing the CFTC's order could narrow or vacate it, handing other states a template that spreads faster than Kalshi's wins do. Either way, the order that dropped this week is a chapter, not the ending.