In the latest barb between the state of New York and the prediction markets industry in court, the state attorney general’s office accused the Commodity Futures Trading Commission (CFTC) of using a rare emergency order to advance Kalshi’s “agenda” in courts across the country.
In an Aug. 31 letter to U.S. District Court for the Southern District of New York Judge Lorna Schofield, New York Deputy AG Katherine Rhodes Janofsky asked the court not to allow the CFTC’s emergency order to have any bearing on Kalshi’s preliminary injunction motion.
“The ‘Order’ should be given no weight on Plaintiffs’ preliminary injunction motion because it is irrelevant and has no persuasive or evidentiary value,” wrote Janofsky. She noted that the AG’s office is not seeking a judicial review of the CFTC’s emergency order itself, but is requesting that it not be factored into any future decisions in the ongoing litigation between Kalshi and New York.
How did CFTC intervene in Kalshi vs. New York?
The AG’s latest filing comes after Kalshi was denied a temporary restraining order by the New York federal court on July 31. That same day, New York AG Letitia James filed a lawsuit in the state’s Supreme Court seeking a total of $36bn in fines, customer restitution, and disgorgement.
Eleven days later, the CFTC issued an emergency order in which it instructed the company to continue operating in the Empire State despite state orders and court rulings. The federal agency took that step after Kalshi petitioned its federal regulator for relief against state enforcement actions.
The CFTC answered the call with just its second emergency declaration in the last 46 years. The first of those came just weeks earlier, when it ordered Kalshi to fulfill existing sports trades in Michigan.
Two veteran gaming lawyers recently commented on The New Normal podcast on the CFTC’s interventions, with one describing them as “blatant contemptuous disregard” for court proceedings.
New York cites Ninth Circuit decision
In the Aug. 31 letter to the court, the New York AG’s office argued that the CFTC’s emergency order does not support or advance Kalshi’s core legal arguments in its court battle with the state, for two major reasons:
- First, the order “merely sponsors the CFTC’s own view of its statutory authority, which has been rejected by multiple courts”
- Second, the order “is not based on the agency’s expert and impartial judgment”
The letter adds that while the CFTC’s emergency order relies on the premise that Kalshi event contracts are defined as swaps under the Commodity Exchange Act (CEA) and is also contingent upon the idea that state gaming laws are preempted by the CEA, multiple “well-reasoned” court decisions rejected those notions.
Janofsky specifically cited the Aug. 28 opinion of the U.S. Court of Appeals for the Ninth Circuit, which issued a 3-0 decision against Kalshi on Friday.
“Through this ‘Order’, the CFTC cannot ‘dictate’ preemption by its own contrary interpretation … Nor can the CFTC direct noncompliance with a court order where federal courts have already held that neither Plaintiffs nor Kalshi suffer irreparable harm from the enforcement of state gaming laws,” added New York’s letter.
CFTC just trying to encourage Kalshi, says NY
New York’s highest legal officers urged the court to acknowledge that, in the state’s belief, the CFTC is trying to encourage Kalshi and other prediction market operators to continue to fight court battles across the country and to offer their event contracts in the meantime.
Janofsky wrote that the order is not an impartial judgment “because its sole function is to advance Plaintiffs’ own arguments in this and other litigations, and to manufacture a version of relief Plaintiffs have already been denied here.”
New York’s AG’s office also opined that, unlike past instances in which the CFTC invoked its emergency powers, the emergency order pertaining to New York is not based on any expert judgment or legitimate source of information.
New York: Is the emergency in the room with us right now?
Finally, New York disputes Kalshi and the CFTC’s suggestions that being forced to stop offering event contracts in New York would result in harm to the company or wider market disruption. CFTC Chairman Michael Selig claimed that there would be “an imminent market emergency” if New York obtained a temporary restraining order against Kalshi.
Janofsky wrote that Kalshi reportedly complied at least in part with the Michigan court order despite the CFTC telling it not to do so and suffered no evident market disruption as a result.
“Simply put, the ‘Order’ is unpersuasive and unprecedented for the CFTC to ‘find’ that people’s inability to engage in unlicensed online sports gambling or wager on whether Taylor Swift will meet the Pope creates a market ’emergency’,” summarized the New York letter.
Kalshi has been ‘on notice’ for almost a year
Janofksy also used the CFTC’s own past public communications as evidence, noting that the agency issued a staff advisory letter in September 2025 “which it later bizarrely withdrew as ‘moot'” in which it stated that its registrants including Kalshi should plan for “state regulatory actions and pending and potential litigation” and inform customers and the public that such actions could limit or remove their sports prediction markets.
“Kalshi has been on notice since at least October 24, 2025 that its sports wagers are unlawful under New York law, yet it knowingly chose to continue and expand,” concluded the letter. “The ‘Order’ cannot ‘protect’ such conduct any more than it can render it legal.”
