The Commission invoked Section 8a(9) emergency authority on August 11, six days after Kalshi told regulators a New York restraining order would shut the exchange down entirely.
The Commodity Futures Trading Commission (CFTC) issued an emergency order on August 11 directing KalshiEX LLC to continue operating its exchange in accordance with the Commodity Exchange Act’s Core Principles.
New York Seeks $36 Billion From a $22 Billion Company
New York seeks $36 billion in compensatory damages “at minimum pending accounting,” excluding punitive damages and costs, according to the Commission’s order, which cites the state’s filing. The state additionally seeks disgorgement of all profits Kalshi obtained from offering event contracts, plus a penalty of three times that amount.
The order records that Kalshi’s publicly reported valuation is $22 billion, citing New York’s own verified petition. The compensatory figure alone exceeds that valuation by $14 billion before the disgorgement and treble penalty are applied.
Attorney General Letitia James filed the complaint at 12:01 a.m. on July 31 in the Supreme Court of the State of New York for the County of New York, alleging Kalshi’s operations contravene state gambling laws. The state moved for a temporary restraining order barring Kalshi from operating a business offering contracts on sports, culture, elections, and other events within or from New York, or to persons in New York.
The Commission’s order states that New York offers no definition of “other events” and reads the motion as seeking to prohibit Kalshi from offering all event contracts.
Kalshi Notified Regulators on August 1
Kalshi submitted a notification of a market emergency to the Commission on August 1, the day after the complaint was filed. The exchange told the Commission the restraining order risks its ability to comply with Core Principles 2, 4, 6, 7, 9, 11, 12, and 21.
According to the order, Kalshi said the restraining order would enjoin the operation of the exchange completely rather than a single category of contracts, would require refunds to customers and disgorgement of profits from completed trades, and would expose traders to losses exceeding the collateralized value of their contracts. Kalshi said the disruptive effect may be felt before a restraining order is granted.
The case has been removed to federal court, docketed as No. 1:26-cv-06550 in the Southern District of New York. The Commission’s order acknowledges the matter may be delayed by remand proceedings.
Section 8a(9) Invoked Twice in Under a Month
Section 8a(9) of the Commodity Exchange Act permits the Commission to direct a registered entity to take action it judges necessary to maintain or restore orderly trading whenever it has reason to believe an emergency exists. The statute defines emergency to include threatened or actual market manipulations and any major market disturbance preventing a market from accurately reflecting supply and demand.
The Commission found that New York’s enforcement action and restraining order motion constitute a major market disturbance under that definition. An emergency order issued under the section is reviewable only in the Court of Appeals for the circuit where the party resides or has its principal place of business, or in D.C. Circuit.
The order cites a July 14 Commission order that used the same emergency power to direct Kalshi to fulfill trades involving Michigan residents. The August 11 order was signed by Christopher J. Kirkpatrick, Secretary of the Commission.
Order Cites a Bitcoin Contract as Illustration
The Commission’s findings use a crypto position to illustrate the disruption it identifies. The order describes a crypto asset trader who has taken a position on Kalshi on the price of Bitcoin at the end of 2026 and states that a forced liquidation of that position could disrupt the trader’s strategy and require the trader to unwind other positions.
The order lists contracts on whether a crypto asset will reach a certain price among the products traders would lose access to, alongside contracts on Federal Open Market Committee rate decisions, Strait of Hormuz traffic, state droughts, and recession timing.
The order states that if Kalshi were shut down, trading activity would move to other exchanges and affect event-contract prices for reasons unrelated to the underlying events. It also states that contracts would price in a risk premium reflecting the possibility that the market could be dissolved by a single state.
Selig Says States Lack Authority Over Interstate Markets
Chairman Michael S. Selig said in the Commission’s announcement that 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. He said Congress did not intend derivative exchanges to be regulated under a patchwork of state gaming laws and that New York has no business regulating interstate financial markets.
The Crypto Times contacted the New York Attorney General’s office and Kalshi for comment at 8:20 am UTC on August 12.
CFTC Has Sued Nine States
The Commission has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin to protect its jurisdiction, according to the announcement. It has also filed amicus briefs in the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.
Kalshi obtained designation as a CFTC-regulated contract market on November 3, 2020. On August 4, a federal judge denied a Commission request to block New York’s case against the exchange, which The Crypto Times covered at the time. Kalshi was separately sued by FlightAware on August 10 in the Southern District of New York over flight cancellation contracts.
