CFTC Blocks NY Shutdown, Citing Hypothetical Bitcoin Exposure

The Commodity Futures Trading Commission (CFTC) has ordered Kalshi to keep operating its exchange after New York's attempt to stop the platform was deemed a market emergency. The commission cited a hypothetical Bitcoin position to argue that forced liquidation could spread losses well beyond prediction markets.

The CFTC found that New York's enforcement action would amount to a 'major market disturbance,' calling the threat of a sudden shutdown 'existential' for regulated markets, traders, and its own jurisdiction. The commission warned that shutdown risk would price a premium into every event contract, creating arbitrage driven by enforcement risk rather than the events being traded.

On August 11, the CFTC directed Kalshi to keep running its exchange under normal practices and the Commodity Exchange Act's Core Principles. The emergency order followed Kalshi's August 1 warning that New York's requested restraining order could stop it from offering event contracts from the state altogether.