CFTC Exercises Emergency Authority Amid New York Prediction Market Dispute

Thursday, August 13, 2026

On August 11, the CFTC announced that it exercised its emergency authority under Section 8a(9) of the Commodity Exchange Act (CEA) and ordered a federally regulated event-contract exchange to continue operating in accordance with the CEA’s Core Principles and normal practices. The order followed the exchange’s notification that a lawsuit and requested temporary restraining order (TRO) filed by the New York Attorney General threatened its continued operation.

The New York Attorney General filed the lawsuit on July 31, alleging that the exchange’s event-contract offerings violate New York gambling laws and seeking a TRO that would prohibit the exchange from offering event contracts within or from New York or to New York residents. The CFTC concluded that the requested relief presented a market emergency. Specifically, the Commission found that:

• A shutdown could disrupt open positions. Because the exchange is headquartered in New York, the CFTC stated that the requested TRO could effectively prevent it from offering event contracts nationwide and could require liquidation of existing positions.
• Legal uncertainty could distort pricing. The Commission reasoned that traders could price the risk of a forced shutdown into event contracts, impairing price discovery for reasons unrelated to the underlying events.
• Trading could shift between exchanges. The CFTC found that participants could migrate to exchanges headquartered outside New York, creating pricing disparities based on perceived legal risk rather than supply and demand.
• State restrictions could conflict with federal oversight. The Commission reiterated its position that the CEA grants it exclusive jurisdiction over derivatives transactions traded on designated contract markets and that state gambling laws cannot displace that framework.

The order directs the exchange to continue performing its functions in accordance with the CEA’s Core Principles and normal practices. It does not resolve the merits of New York’s underlying lawsuit.

Putting It Into Practice: The order represents another escalation in the federal-state dispute over prediction markets (previously discussed here and here). The CFTC has increasingly asserted that federally regulated event contracts are subject to a uniform national derivatives framework, while several states continue to assert authority under state gambling laws. Designated contract markets and other firms involved in event-contract offerings should monitor the litigation closely, review contingency plans for potential market disruptions, and update state-by-state regulatory assessments as courts continue to address the scope of federal preemption.