CFTC Exercises Emergency Authority Over KalshiEX to Maintain Market Stability

The Commodity Futures Trading Commission (CFTC) has exercised its emergency authority to safeguard market stability following an emergency notification from KalshiEX, LLC. The federal regulator ordered the exchange to continue its operations in adherence to the Core Principles set forth in the Commodity Exchange Act (CEA). KalshiEX submitted the notification after New York Attorney General Letitia James filed a complaint against the designated contract market in state court on July 31. New York's legal action seeks more than $36 billion in damages as well as a temporary restraining order aimed at halting KalshiEX from offering event contracts nationwide. Under the CEA, the Commission is mandated to maintain a uniform national market for derivatives transactions, support public confidence through market resilience, and protect the price discovery process on centralized exchanges from major disruptions. CFTC Chairman Michael S. Selig defended federal jurisdiction, stating that Congress did not intend for interstate financial exchanges to be governed by a patchwork of state gaming laws. Selig noted that these platforms match bids and offers across state borders and utilize clearinghouses to backstop customer transactions nationwide, placing the regulation of such interstate markets under federal oversight. The regulatory conflict reflects broader friction between federal derivatives oversight and state authorities. To protect its exclusive jurisdiction over designated contract markets, the CFTC has filed lawsuits against several states, including Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin. The Commission has also submitted amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.