The order invokes Section 8a(9) emergency powers and warns a state shutdown could force liquidation of federally regulated bitcoin-price contracts. Chair Michael Selig is now openly disputing state jurisdiction over prediction markets.
The Commodity Futures Trading Commission on Tuesday ordered KalshiEX to keep its exchange open in every state, invoking the emergency authority in Section 8a(9) of the Commodity Exchange Act. The order responds to a lawsuit filed on 31 July by New York Attorney General Letitia James, who accused Kalshi of running an illegal sports gambling business and asked a court for a temporary restraining order along with penalties that could reach $36 billion.
Chair Michael Selig's statement was blunt. "New York has no business regulating these interstate financial markets," he said. The commission's order argues a state-level shutdown could produce a "major market disturbance" for a federally registered designated contract market, and lists the specific positions traders would lose access to: contracts on year-end bitcoin prices, FOMC rate decisions, Strait of Hormuz traffic, US drought conditions and recession timing. One trader singled out in the filing holds a directional bet on where bitcoin trades at the end of 2026; a forced unwind, the CFTC argues, would ripple into that trader's other positions.
Section 8a(9) is a rarely used tool. It lets the CFTC direct a registered entity to take action needed to maintain orderly trading, and until this year no chair had reached for it in a fight with a state attorney general. Selig has now done it while suing New York, Illinois, Arizona, Connecticut and other states in parallel, arguing that his agency holds "exclusive jurisdiction" over federally registered prediction markets, particularly on sports betting.
Kalshi's public response leaned on the plumbing argument. "If Nasdaq shut down in New York: liquidity would dry up, prices would spike, and trading stocks and other instruments would become harder — sometimes impossible — for people everywhere across the country," a spokesperson said, adding that "financial markets are regulated at the federal level." That framing is convenient for a platform whose $40 billion private valuation depends on federal-only regulation surviving contact with 38 state attorneys general, all of whom have backed a parallel Massachusetts case against the exchange.
The New York suit is not narrow. James alleged Kalshi failed to license under the New York State Gaming Commission, exposed residents under the state's 21-year gambling age to sports contracts, and dodged applicable taxes. Her requested TRO would have stopped Kalshi from operating not just in New York but nationwide, alongside restitution, disgorgement and civil penalties totalling at least $36 billion. That number sits well above Kalshi's June valuation and would be existential if enforced.
For the CFTC, the emergency order is the second move in a pattern. Selig has already opened a rulemaking process to codify federal oversight of prediction markets, and his agency filed suit against New York in April over a separate prediction market crackdown. The 38 attorneys general lining up behind Massachusetts against Kalshi treat the same platforms as unlicensed sports books. The result is two regulators claiming primary authority over the same product, with neither willing to yield.
Robinhood joined the prediction-market race earlier this year with its own hub, and the state-federal dispute now affects any brokerage building similar products. Prediction contracts settle in cash based on real-world outcomes, which is structurally identical to how CME futures on interest rates and commodities work; the difference is that a sports-outcome contract looks to a state gaming regulator like an unlicensed parlay. Selig's position collapses that distinction. His statement made clear he sees no material difference between a rate-decision contract and a Super Bowl contract in terms of the exchange's federal registration.
The near-term test is whether a New York state court agrees that a federal agency can direct a private exchange to override a pending state TRO. If it does, the CFTC will have established a doctrine that prediction markets sit in the same bucket as CME futures. If it does not, Selig will have used emergency powers to protect a platform he already regulates, and the states will treat that as evidence the CFTC has overreached.
Kalshi and Polymarket both back federal oversight, a rare instance of a regulated industry actively lobbying for the regulator that has claimed it. That alignment is the political spine of Selig's argument. Prediction markets have grown to multibillion-dollar volumes in a year, and both operators would rather answer to one commission than 50 state gaming commissions with different sports-betting rules. Whether tribal gaming regulators, who have begun pushing to add carve-out language to the pending Clarity Act, can force Congress to draw a firmer line is the next front. For now, one CFTC order has kept Kalshi's book open through what would otherwise have been a nationwide shutdown.
