Kalshi operates a CFTC-designated contract market where users trade event contracts tied to sports, politics and other outcomes. The company argues those products are derivatives governed by the federal Commodity Exchange Act, while New York classifies its sports contracts as unlicensed gambling subject to state safeguards, taxes and age limits. The dispute has become a direct test of whether the Commodity Futures Trading Commission's asserted exclusive jurisdiction over national derivatives markets preempts state gambling enforcement.

On Aug. 11, the CFTC invoked emergency authority after KalshiEX notified the agency of a "market emergency," ordering the exchange to continue operating in line with the Commodity Exchange Act's core principles. New York Attorney General Letitia James had sued on July 31, seeking a temporary restraining order barring Kalshi from offering all event contracts nationwide and more than $36 billion in damages. It was the agency's first use of such powers since 1980, sharply escalating a federal-state jurisdictional fight whose outcome will shape where prediction markets can legally operate.