CFTC Invokes Emergency Authority to Order KalshiEX to Continue Operations

The CFTC used emergency authority on August 11, 2026, to order KalshiEX, LLC to continue operating under Commodity Exchange Act Core Principles, directly overriding a state lawsuit seeking to shut down the prediction market exchange nationwide.

New York Attorney General Letitia James filed the complaint in state court on July 31, requesting a temporary restraining order to prohibit KalshiEX from offering all event contracts nationwide and seeking more than $36 billion in damages, according to the CFTC's press release. KalshiEX notified the CFTC of a market emergency in response to the lawsuit.

The CFTC's order mandates that KalshiEX continue to operate in accordance with the Commodity Exchange Act's Core Principles. The invocation of emergency authority signals that the regulator views the state action as a threat to markets and price discovery significant enough to warrant federal intervention.

CFTC Chairman Michael S. Selig framed the conflict in explicit jurisdictional terms: "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 added that "Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws. These are financial exchanges that offer financial instruments and operate across state lines," per the CFTC release.

The emergency order is part of a broader federal push to assert regulatory dominance over derivatives exchanges against state-level enforcement. The CFTC has filed lawsuits against nine states, including New York, Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin, to protect its regulatory jurisdiction. The commission has also filed amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts regarding state enforcement actions against CFTC-regulated derivatives clearing organizations.

The bear case rests on two gaps in the record: the CFTC's invocation of emergency authority itself acknowledges "major market disruptions" that "hamper" orderly markets and price discovery, but the sources do not detail what operational or technical disruption KalshiEX faced beyond the New York lawsuit. Additionally, New York's lawsuit, filed by a state attorney general with $36 billion in damages sought, reflects regulatory concern about event contract offerings. The CFTC's assertion that states have no authority to regulate interstate financial markets does not address New York's underlying claims or the legal merits of the state's case.

What remains unresolved is what "continue to operate in accordance with the Commodity Exchange Act's Core Principles" requires KalshiEX to do operationally: whether it restricts the types of contracts offered, geographic scope, or only requires continued compliance with existing rules. The legal standard and duration of the CFTC's emergency authority, and whether the order has a sunset clause, are also not specified in the release.