New York v. Kalshi: What’s Actually at Stake

New York is trying to shut Kalshi down. On July 31, 2026, Attorney General Letitia James filed a civil enforcement action in Manhattan alleging that the largest U.S. prediction market is an unlicensed gambling operation, and asked a court to bar it from the state and surrender penalties and gains — treble profits under Penal Law § 80.10 plus $100,000 per unauthorized sports-wagering offer, pending an accounting. The CFTC’s August 11 emergency order describes New York’s demand as $36 billion in compensatory damages “at minimum pending accounting.” Eleven days later, the CFTC — Kalshi’s federal regulator — answered with its second invocation in four weeks of an emergency power that had sat dormant since 1980: an order under Section 8a(9) of the Commodity Exchange Act directing Kalshi to keep operating. One sovereign is trying to close the exchange. Its federal regulator is ordering it to stay open.

The dollar figure is the headline; the jurisdictional collision is the case. Every question in this litigation reduces to one: are event contracts listed on a CFTC-designated exchange swaps under exclusive federal jurisdiction, or bets under state gambling law? One federal appeals court has said likely swaps. A federal judge in Manhattan has said New York’s gambling laws still apply. New Jersey has asked Justice Alito for more time to decide whether to seek Supreme Court review — the deadline is now September 3, 2026 — and no certiorari petition was on file as of August 31, 2026. As of August 31, 2026, Kalshi remains live in New York — no court has ordered it to stop — and this page tracks the case as rulings land.

What does New York actually allege?

The state’s verified petition, filed in the Supreme Court of the State of New York, New York County, is brought under Executive Law § 63(12), which lets the attorney general sue over “repeated and persistent” illegality in the conduct of a business. The illegality New York alleges is total: in the petition’s words, “Each contract is a bet.”

The predicate violations span the New York Constitution’s gambling ban (Article I, § 9), the Penal Law’s bookmaking provisions (§§ 225.05, 225.10 and 225.20), the Racing Law’s mobile sports wagering licensing regime (§§ 1367(16)(a), 1367-a(2)(a) and 1367-a(4)(b)), and the federal Wire Act (18 U.S.C. § 1084(a)). The theory: Kalshi runs a mobile sportsbook without the license New York’s nine legal operators hold — operators taxed at roughly 51% of gross gaming revenue, who paid the state more than $1 billion in 2024, per the petition.

Three allegations do the heavy lifting. First, that Kalshi launched sports “trading” on January 23, 2025 and advertised it to New Yorkers as legal in all 50 states. Second, that Kalshi accepts customers aged 18 to 20, below New York’s minimum of 21 for mobile sports wagering. Third, that it offered markets on games involving New York college teams — the petition cites Siena–Duke on March 19, 2026 and Hofstra–Alabama on March 20, 2026 — wagers even licensed New York books are barred from taking. The relief requested: a permanent injunction, an accounting, restitution and disgorgement, a penalty of three times Kalshi’s gains under Penal Law § 80.10, and $100,000 for each unauthorized offer of sports wagering under the Racing Law. That arithmetic — treble gains plus per-offer penalties, against a platform the petition says reports a $22 billion valuation and $178 billion in annualized transaction volume — is the petition’s actual demand. The $36 billion figure is the CFTC’s characterization of that demand (August 11 order: “$36 billion in compensatory damages ‘at minimum pending accounting'”). “Prediction markets like Kalshi are gambling platforms, plain and simple,” James said in announcing the suit.

What do Kalshi and the CFTC argue?

Kalshi’s defense is the same one it has run in more than a dozen states: it is a designated contract market registered with the CFTC, its event contracts are swaps under the Commodity Exchange Act, and the CEA gives the federal government exclusive jurisdiction over trading on registered exchanges — so state gambling law cannot reach it. A company spokesperson called the New York suit “political theater,” and CEO Tarek Mansour argued on CNBC that Kalshi, like Nasdaq, merely matches buyers and sellers for a transaction fee — so New York could “copy and paste that lawsuit and file it against Nasdaq.” Kalshi removed the state’s case to federal court on July 31 (People v. KalshiEX LLC, 1:26-cv-06550). New York moved to remand on August 7; Kalshi opposed on August 21; New York replied August 28. The remand motion is pending before Judge Broderick.

The CFTC did not stop at supportive briefs. It went to federal court itself seeking a temporary restraining order to halt New York’s enforcement action. Judge Jed Rakoff, sitting in Part I, denied the CFTC’s TRO from the bench on July 31 (order entered August 3) without prejudice. United States v. New York (1:26-cv-03404) was reassigned from Judge Marrero to Judge Lorna G. Schofield on August 5. The docket shows no renewed TRO and no August 7 denial by Marrero. Schofield has set an initial pretrial conference for August 31 and a preliminary-injunction hearing for September 14. Four days later came the emergency order. Chairman Michael Selig’s framing, in the commission’s release, was not subtle:

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.

Why is the CFTC’s emergency order historic?

Section 8a(9) of the Commodity Exchange Act lets the commission direct a registered exchange to take whatever action the commission deems necessary when it finds an emergency. Before this summer it had been used four times in the agency’s history — Maine potato futures in 1976, the December coffee contract in 1977, March wheat in 1979, and the grain-embargo suspension of 1980 — every one of them to halt or restrict runaway trading. Then it sat dormant for 46 years.

Chairman Selig has now invoked it twice in 30 days, both times in the opposite direction: to keep markets open. On July 14, after a Michigan court ordered Kalshi to void and refund certain trades by Michigan residents, the CFTC stayed Kalshi’s proposed emergency rule and ordered the exchange to honor the trades through normal settlement, reasoning that canceling executed trades based on a customer’s state of residence would undermine confidence in regulated derivatives markets. On August 11, after Kalshi notified the commission that New York’s suit — which seeks a TRO — constituted a market emergency, the CFTC ordered Kalshi to continue operating in accordance with the CEA’s core principles rather than suspend service.

The historic part is the inversion, and the collision it sets up. A power built to stop overheated markets is being used to keep a market running against the wishes of a state. If a court ultimately enjoins Kalshi in New York while a standing federal order directs it to keep trading, the exchange faces contradictory commands from two sovereigns. Conflicts like that are what the Supreme Court exists to resolve.

How does this end up at the Supreme Court?

The appellate scoreboard is genuinely split. On April 6, 2026, the Third Circuit held 2-1 in KalshiEX LLC v. Flaherty that Kalshi’s sports event contracts are likely swaps under the CEA and that federal law likely preempts New Jersey’s gambling enforcement — the first federal appeals court to say so. Three months later, Judge Analisa Torres of the Southern District of New York reached the opposite conclusion in Kalshi’s own suit against New York’s Gaming Commission, denying Kalshi a preliminary injunction on July 7 and holding that the CEA does not preempt New York’s gambling laws as applied to sports contracts. That ruling is on appeal to the Second Circuit. In the Ninth Circuit, a Nevada federal judge ruled in November 2025 that sports event contracts are not swaps and ordered Kalshi out of the state; the appeals court heard consolidated argument from Kalshi, Robinhood and Crypto.com on April 16, 2026, with a panel that sounded skeptical of the swaps theory. Its decision could land any week. Rulings are also pending in the Fourth Circuit and the Massachusetts Supreme Judicial Court, where 38 state attorneys general — New York included — filed a joint brief backing the state.

New Jersey, meanwhile, has asked Justice Alito for more time after the Third Circuit loss. A second extension (Appl. 25A1465, July 24) moved the certiorari deadline to September 3, 2026. As of August 31, 2026, no petition is on the docket. The court is more likely to take a question once appeals courts openly disagree — which is why the Ninth Circuit’s pending decision matters so much. If it affirms Nevada, the split is clean, and a merits ruling becomes realistic for 2027. If it sides with the Third Circuit, the justices may wait.

What would each outcome mean for traders?

Nothing here is a reason to open or close a position; it is a map of what the endgames look like.

Outcome	What it would mean
States win broadly (preemption rejected)	A state-by-state patchwork. Sports contracts get geofenced out of states that demand gaming licenses, the way sportsbooks already are. New York’s petition seeks restitution and disgorgement, so money flowing back to New York customers becomes possible — and open positions in exiting states face the unwind question below.
Federal preemption prevails (the Third Circuit view)	One national rulebook. CFTC-listed event contracts trade in all 50 states regardless of state gaming law, and states are pushed to the edges — advertising, consumer protection, taxes. The $36 billion demand likely never reaches a damages phase.
Courts split the difference	Sports contracts get treated as state-regulable wagering while election and economic contracts stay federal. Platforms keep national markets on rates, elections and indices but run state-gated sports books — operationally messy, and the most litigated boundary imaginable.

The unwind question already has a live case study. When a Michigan court ordered trades voided and refunded, the CFTC ordered them honored through normal settlement instead — and that conflict was never fully resolved before the New York fight escalated. A trader’s practical exposure in this litigation is threefold: access (whether a state gets switched off), open positions (settled versus voided, and on whose order), and — in New York specifically — whether restitution ever enters the picture. Which sovereign’s instruction an exchange follows when the orders conflict is, as of August 2026, an open question in the most literal sense.

Case timeline

This tracker is updated as the case develops. Last updated August 31, 2026.

• January 23, 2025 — Kalshi launches sports “trading,” advertising it as legal in all 50 states, per New York’s petition.
• October 24, 2025 — The New York State Gaming Commission demands Kalshi cease and desist operating an unlicensed mobile sports wagering platform.
• October 27, 2025 — Kalshi sues the commission in the Southern District of New York (KalshiEX LLC v. Williams, No. 25-cv-08846). The state agrees to pause enforcement pending the injunction ruling.
• November 2025 — A Nevada federal judge rules sports event contracts are not swaps and orders Kalshi to stop offering them in Nevada; the Ninth Circuit later declines to pause that order.
• April 6, 2026 — The Third Circuit rules 2-1 for Kalshi in KalshiEX v. Flaherty: the CEA likely preempts New Jersey’s enforcement.
• April 16, 2026 — The Ninth Circuit hears consolidated argument in the Nevada appeals (Kalshi, Robinhood, Crypto.com).
• June 29, 2026 — A Michigan court orders Kalshi to stop offering certain contracts to Michigan residents, and later to void and refund trades.
• July 7, 2026 — Judge Torres denies Kalshi’s preliminary injunction against the Gaming Commission: New York’s gambling laws are not preempted as applied to sports contracts. Kalshi appeals to the Second Circuit the next day.
• July 14, 2026 — The CFTC invokes Section 8a(9) for the first time since 1980 (Release 9267-26), staying Kalshi’s proposed emergency rule and ordering the Michigan trades honored.
• July 27, 2026 — The district court denies Kalshi an injunction pending appeal.
• July 31, 2026 — New York files People v. KalshiEX LLC in Manhattan: injunction, restitution, treble penalties, up to roughly $36 billion per press accounts.
• July 31, 2026 — Kalshi removes People v. KalshiEX LLC to S.D.N.Y. (1:26-cv-06550). Same day, Judge Rakoff (Part I) denies the CFTC’s TRO in United States v. New York without prejudice (order entered August 3).
• August 5, 2026 — United States v. New York is reassigned from Judge Marrero to Judge Lorna G. Schofield. The Second Circuit SO-ORDERS Kalshi’s opening brief in 26-1835 due August 31.
• August 7, 2026 — New York moves to remand 1:26-cv-06550; Kalshi opposed on August 21; New York replied August 28. Motion pending before Judge Broderick.
• July 24, 2026 — Justice Alito grants New Jersey a second extension, moving the certiorari deadline from August 4 to September 3, 2026 (Appl. 25A1465). As of August 31, 2026, no petition is on the docket.
• August 11, 2026 — The CFTC issues its second Section 8a(9) order in 30 days (Release 9281-26), directing Kalshi to keep operating.
• Watching next — August 31 Second Circuit opening brief due (SO-ORDERED Aug 5; not yet on the public docket as of this morning) and U.S. v. New York conference (11:00 a.m., no minute order yet); September 3 New Jersey certiorari deadline (no petition on file); September 14 U.S. v. New York PI hearing; the Ninth Circuit, the Fourth Circuit, and the Massachusetts SJC.

Quick answers

Is Kalshi still available in New York? Yes. As of August 31, 2026, no court has ordered Kalshi to stop serving New York, and a standing CFTC emergency order (Release 9281-26 / August 11 Section 8a(9) order) directs it to keep operating. That could change quickly if the state wins a restraining order.

What is the CFTC’s Section 8a(9) emergency power? A Commodity Exchange Act provision letting the commission direct a registered exchange to act as the commission deems necessary in an emergency. It was used four times between 1976 and 1980 — always to restrict trading — then not at all for 46 years, until the two 2026 Kalshi orders.

Could New York really collect $36 billion? The petition does not name a dollar total. It asks for treble gains under Penal Law § 80.10 plus $100,000 per unauthorized wagering offer, pending an accounting. The CFTC’s August 11 order is the primary source that describes New York’s demand as $36 billion “at minimum pending accounting.” What a court would actually award is another matter entirely, and if federal preemption prevails the case never reaches damages at all.

What happens to open positions if a court blocks Kalshi in a state? Michigan is the precedent: a state court ordered trades voided and refunded, and the CFTC ordered them honored through normal settlement. Which order controls is unresolved — it is one of the sharpest questions in the whole dispute.

When could the Supreme Court rule? New Jersey’s deadline to petition is September 3, 2026; as of August 31, 2026, only the 25A1465 extension applications are on file, not a petition. Whether the Court would take a petition likely depends on the Ninth Circuit creating a clean split; even on a fast track, a merits decision before 2027 is unlikely.

Is this only about sports markets? Sports contracts drive the case — the licensing, age, and college-team allegations are all sports-specific — but New York’s petition alleges the entire platform, including election and culture markets, meets the state’s definition of gambling.

Last verified August 31, 2026.