In an ongoing legal battle, New York's attorney general's office has sharply criticized the Commodity Futures Trading Commission (CFTC) for using a rare emergency order in connection with Kalshi, a prediction markets company. In a letter dated August 31 addressed to Judge Lorna Schofield of the U.S. District Court for the Southern District of New York, Deputy AG Katherine Rhodes Janofsky urged the court to disregard the CFTC's emergency order regarding Kalshi in any future decisions related to the company's preliminary injunction motion.
Janofsky stated, "The 'Order' should be given no weight on Plaintiffs’ preliminary injunction motion because it is irrelevant and has no persuasive or evidentiary value." The letter emphasized that while New York is not seeking a judicial review of the CFTC's emergency order, it is critical that the order not influence current litigation between Kalshi and the state.
The context for this dispute comes from a court ruling on July 31, where New York’s federal court denied Kalshi a temporary restraining order. On the same day, Attorney General Letitia James filed a substantial lawsuit in state Supreme Court against Kalshi, demanding total fines, restitution, and disgorgement that could reach $36 billion.
In response to a request from Kalshi for relief against state enforcement actions, the CFTC issued a seldom-seen emergency order just eleven days later, allowing Kalshi to continue its operations in New York despite state restrictions. This was only the CFTC's second emergency declaration in the past 46 years; the first instance occurred shortly before when the agency compelled Kalshi to fulfill existing sports contracts in Michigan.
Commentators, including veteran gaming lawyers, expressed concern on The New Normal podcast about the CFTC interventions, with one describing them as indicative of a "blatant contemptuous disregard" for judicial procedures.
New York’s letter outlined two primary reasons for dismissing the CFTC’s emergency order. Firstly, it asserted that the order supports the CFTC's interpretation of its statutory authority, which it claims has been refuted by multiple courts. Secondly, it argued that the order lacks the agency's expected impartial judgment.
The letter pointed out that the CFTC's declaration is based on the assumption that Kalshi's event contracts constitute swaps under the Commodity Exchange Act (CEA), contradicting established court rulings. Janofsky referenced a unanimous decision from the U.S. Court of Appeals for the Ninth Circuit against Kalshi issued on August 28, emphasizing that the CFTC cannot dictate preemption through its own interpretations nor suggest noncompliance with a court order when harm to Kalshi from state laws has not been established.
The attorney general's office alleged that the CFTC aims to inspire Kalshi and similar companies to pursue their court battles and offer event contracts despite ongoing litigation. Janofsky articulated that the order appears to primarily serve as a tool to bolster plaintiffs’ arguments in ongoing lawsuits, rather than as an impartial judgment based on factual analysis.
Furthermore, New York challenged claims from Kalshi and the CFTC that ceasing the sale of event contracts would lead to substantial harm or market disruption. CFTC Chairman Michael Selig had previously asserted that a temporary restraining order against Kalshi could trigger an imminent market emergency.
Janofsky countered this by noting that Kalshi had partially complied with a Michigan court ruling, per the agency’s directive, without experiencing any apparent market disruption. The letter questions the legitimacy of branding the inability to conduct unlicensed online sports gambling, or wager on cultural events, as a pressing market emergency.
Additionally, Janofsky referred to the CFTC's past advisories, recalling that in September 2025, the agency had cautioned registrants like Kalshi regarding possible state regulatory actions and indicated that these could impact their sports prediction markets. She concluded that Kalshi had been aware since at least October 2025 that its operations were illegal under New York law but chose to persist with its activities. "The 'Order' cannot 'protect' such conduct any more than it can render it legal," the letter stated.
