TL;DR:
- The CFTC requested an emergency temporary restraining order to block New York’s lawsuit against Kalshi, but the request was denied.
- Judge Jed S. Rakoff determined that the agency failed to demonstrate a likelihood of success on the merits or the risk of imminent irreparable harm.
- The CFTC may renew its request before Judge Victor Marrero on August 7: New York’s lawsuit remains active.
Judge Jed S. Rakoff, of the U.S. District Court for the Southern District of New York, denied without prejudice the emergency request filed by the CFTC to temporarily block the enforcement action brought by the state of New York against prediction markets firm Kalshi. The ruling leaves the state lawsuit in place and opens the possibility for the agency to renew its request before Judge Victor Marrero on the upcoming August 7.
Rakoff grounded his denial in the finding that the CFTC failed to demonstrate a high likelihood of success on the merits or the existence of imminent and irreparable harm that would justify an emergency measure. The decision does not resolve the underlying dispute, but allows the state lawsuit to proceed while the jurisdictional debate remains open.
The dispute originated when New York Attorney General Letitia James, together with Governor Kathy Hochul, filed a lawsuit against Kalshi accusing it of operating an illegal and unlicensed gambling business in the state. The complaint contends that Kalshi’s contracts tied to sporting events, elections, and other real-world occurrences function as gambling products subject to state legislation. This lawsuit followed a cease-and-desist order issued by the New York Gaming Commission in October 2025.
The CFTC and Federal Jurisdiction in Dispute with the States
Kalshi, for its part, maintains that its contracts are financial derivatives regulated at the federal level, listed on an exchange supervised by the CFTC, and therefore fall under the agency’s exclusive jurisdiction, which would bar any state lawsuit against it. The CFTC shares that position and argues that federal commodities legislation preempts state gambling rules when it comes to contracts traded on federally regulated exchanges.
The case also incorporated a significant precedent: the CFTC ordered former congressman George Santos to pay more than $35,000 and accept a three-year trading ban, after determining that he manipulated a Kalshi contract tied to his attendance at the 2026 State of the Union address. The outcome of this dispute could set a precedent for the regulation of prediction markets across the country.
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