CFTC Once Again Invokes Emergency Powers, Orders Kalshi to Ignore Court Orders
The CFTC issued an emergency order on Tuesday evening directing Kalshi to continue operating under the Commodity Exchange Act’s Core Principles.
This direction is in complete disregard of what New York’s state courts might order. The trigger was Kalshi notifying the agency that New York Attorney General Letitia James’s $36 billion lawsuit had created a market emergency.
The CFTC stated that the temporary restraining order New York is seeking would be so disruptive that it could endanger the continued operation of a federally regulated designated contract market. The order invokes Section 8a(9) of the Commodity Exchange Act, which allows the agency to intervene when it determines a major market disturbance threatens orderly trading.
This is not the first time for an act such as this. The CFTC issued a functionally identical emergency order against Michigan last month, directing Kalshi to defy Judge Aquilina’s restraining order. Two former CFTC counsels testified at a House Agriculture Subcommittee hearing that the Michigan action was extraordinary and unprecedented. That was a month ago, and now the agency has done it twice, resembling a playbook versus state lawsuits.
The CFTC’s Bold Stance
The legal mechanics aren’t super straightforward and require a deeper look to grasp. A state court restraining order is a court order. A federal agency telling a private company to ignore a court order is not a thing that happens in ordinary regulatory practice. By no means is the CFTC a court, and it cannot vacate a state court order. What it can do, apparently, is tell its registrant that federal law requires it to keep operating, and let the constitutional confrontation play out in whatever jurisdiction resolves it first.
CFTC Chairman Selig framed New York’s approach as an attempt to kill the market before judges rule on it, saying New York wanted event-contract derivatives to wither under its iron curtain of state gaming laws. He argued that exchanges matching bids across state lines are interstate financial venues rather than gambling operations. “New York has no business regulating these interstate financial markets,” he said.
President Trump made his own contribution. He called state officials who are suing Kalshi “scum” in social media posts this week. That is not a legal argument, but it is a data point about how politically committed the administration is to the CFTC’s position, especially considering the number of ties between the Trump family, administration, Polymarket, and Kalshi.
A Rare Legal Path Navigated by The CFTC
The Section 8a(9) emergency authority has been used rarely. Its prior invocations involved acute market crises: Hunt Brothers silver cornering in 1980, coffee market disruptions, and potato futures manipulation. A Bloomberg Law analysis noted the authority had previously been employed for potatoes and coffee. It is now being used, twice in two months, to instruct a prediction market platform to ignore state court orders.
What’s now extremely clear is the strategic logic underneath the legal argument. The CFTC is not waiting for courts to resolve the preemption question. It is creating facts on the ground, and every day Kalshi operates despite a state court order, the practical argument for preemption strengthens. A shutdown would create exactly the market disturbance the agency claims to be preventing. Keeping the platform open while the legal fights develop is both the stated regulatory goal and the desired litigation outcome.
Whether the emergency authority actually works depends on whether a federal court agrees that the CFTC can instruct its registrant to defy state court orders. No court has ruled on that question yet. The confrontation is heading toward exactly the kind of federal-versus-state constitutional showdown that the Supreme Court eventually has to resolve.
The Timeline Lengthens and the Ploth Thickens
The CFTC’s emergency administrative order is best understood as the agency’s response to running out of judicial options in New York. The timeline tells the full story.
On August 4, Judge Rakoff denied the CFTC’s emergency TRO, finding the agency had not shown a high likelihood of success on the merits. We covered that ruling alongside Utah’s summary judgment against Kalshi, the strongest state court win yet.
On August 7, Judge Marrero denied the CFTC’s request to pause its own enforcement action against Kalshi, keeping the New York case active and moving forward on schedule. On August 11, with every judicial avenue in New York exhausted, the CFTC reached for a non-judicial tool: the emergency administrative order directing Kalshi to keep operating regardless of what state courts say.
The agency has now sued nine states, filed amicus briefs in the Sixth and Ninth Circuits, sought emergency TROs in multiple jurisdictions, and lost in federal court in New York at every stage. The emergency administrative order does not change any of those outcomes. It is not a court ruling, and no state or federal judge issued it.
It tells Kalshi what the CFTC believes federal law requires, and leaves the constitutional question of whether that belief overrides a state court order for a court to eventually decide. That court has not weighed in yet, and until it does, the CFTC’s emergency order and New York’s enforcement action exist simultaneously, each claiming authority the other disputes.
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