preferred on
Points of Focus
- CFTC emergency powers challenge state interference with Kalshi contracts nationwide.
- New York seeks up to $36 billion from Kalshi.
- NYC probes Kalshi, Polymarket, Coinbase, and Gemini prediction markets.
The battle over prediction markets has escalated into an unusually direct confrontation between federal and New York regulators, with the Commodity Futures Trading Commission (CFTC) increasingly using its authority to protect federally registered exchanges while New York seeks $36 billion from Kalshi.
The CFTC’s strongest intervention so far came on July 14, when it invoked emergency authority to stop Kalshi from canceling already executed trades after a Michigan court ordered the exchange to unwind contracts involving state residents. The regulator ordered Kalshi to fulfill the trades, arguing that individual states cannot force a federally regulated designated contract market to discriminate between users based on where they live.
🇺🇸 BREAKING: The CFTC invokes emergency authority to keep Kalshi alive against New York's $36 BILLION shutdown demand.
New York AG Letitia James sued to shut the prediction market down, calling it illegal gambling that exposed residents, including minors, to financial risk.… pic.twitter.com/XwEmDwXiwX
— Coin Bureau (@coinbureau) August 11, 2026
That emergency action concerned Michigan, not New York. But it establishes an important precedent as New York pursues a much larger challenge to Kalshi, and the CFTC separately fights the state in federal court.
New York’s Kalshi fight could carry a $36-billion bill
New York Attorney General Letitia James sued Kalshi on July 31, alleging that its event-contract business amounts to an illegal, unlicensed gambling operation.
The state argues that contracts covering sports, elections, and other events fall under New York gambling laws rather than being insulated by Kalshi’s federal status. New York is seeking to halt the allegedly unlawful activity, recover money for customers, and impose financial penalties that state officials said could potentially reach $36 billion, an amount exceeding Kalshi’s reported valuation.
The lawsuit did not emerge in isolation. The New York State Gaming Commission sent Kalshi a cease-and-desist letter in October 2025 over sports contracts. Kalshi responded by suing the commission in Manhattan federal court, arguing that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over its exchange.
That argument suffered a major setback on July 7 when US District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction. Torres concluded that Kalshi had not demonstrated that federal commodities law preempted New York’s gambling rules for its sports contracts. Kalshi has appealed to the Second Circuit.
The CFTC is fighting New York in the same courthouse
The dispute has created an unusual situation in which the federal regulator itself is litigating against New York.
The CFTC sued the state in the Southern District of New York on April 24, seeking a declaration that federal law grants it exclusive authority over event contracts traded on CFTC-registered markets. It also asked for a permanent injunction preventing New York from enforcing state gambling rules against federally registered exchanges.
The agency has taken similar action against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin as the jurisdictional fight spreads nationally.
New York, meanwhile, has expanded its campaign beyond Kalshi. James sued Coinbase Financial Markets and Gemini Titan in April, alleging that their prediction-market products also constitute unlicensed gambling. Those cases seek restitution, forfeiture of allegedly illegal profits, and fines that can reach three times profits generated through the alleged violations.
The result is no longer one Kalshi lawsuit. Manhattan has become one of the central legal battlegrounds for determining whether prediction markets are derivatives governed nationally or gambling products that states can license, tax and restrict.
NYC opens another front against Kalshi and Polymarket
Pressure intensified again this week when the New York City Council launched an investigation into Kalshi, Polymarket, Coinbase, and Gemini Titan.
LATEST: 🇺🇸 The New York City Council announced an investigation into Kalshi, Polymarket, Coinbase, and Gemini Titan over allegations of deceptive and predatory prediction-market marketing tactics targeting minors. pic.twitter.com/CIwP9PX8GY
— CoinMarketCap (@CoinMarketCap) August 12, 2026
Council Speaker Julie Menin is seeking information about user numbers, revenue, advertising, influencer relationships, and safeguards for younger customers. The inquiry includes more than 60 questions and focuses in part on whether prediction platforms have used deceptive marketing or reached underage audiences. The council cannot itself bring criminal charges, but it can issue subpoenas and pursue new local legislation.
Kalshi also has private litigation accumulating in Manhattan. At least five similar class actions involving allegations of unlawful sports betting had already been consolidated in the Southern District of New York by June, while additional cases from states including Oregon and Illinois were transferred there to reduce the risk of conflicting decisions.
That concentration makes New York particularly consequential for the industry. Kalshi is simultaneously defending itself against the attorney general, challenging the Gaming Commission, appealing in the Second Circuit, and facing consolidated private litigation, while its own federal regulator is suing New York over many of the same jurisdictional questions.
The CFTC’s emergency intervention in Michigan shows how far the agency is prepared to go when state orders interfere with a federally registered market. New York now presents the much bigger test: whether that federal protection can withstand a state seeking billions in penalties while arguing that the fastest-growing part of prediction markets is gambling regardless of what the contracts are called.
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