A federal regulator has invoked emergency powers not used since Carter's grain embargo, telling a company to defy a court order, and even the company it is supposed to protect says it is being set up to fail.

"We are being put in an impossible position, looking to follow state court orders that may contradict our federal regulatory obligations."

— Bobby DeNault, head of enforcement at Kalshi, after the CFTC ordered the company to defy a Michigan judge

The Commodity Futures Trading Commission on Tuesday invoked emergency authority not used since Jimmy Carter embargoed grain shipments to the Soviet Union in 1980, and used it to tell a gambling-adjacent betting platform to keep operating despite a federal court ruling against it.

The target was Kalshi, the prediction market giant valued at $22 billion that lets users trade on the outcome of elections, sports games, weather events, and the exact words of presidential speeches. New York Attorney General Letitia James sued Kalshi on July 31, accusing it of running an unlicensed gambling operation and seeking over $36 billion in damages. A federal judge in the Southern District of New York denied Kalshi's bid to block the state from enforcing its own gambling laws.

The CFTC's response was to declare a "market emergency" and order Kalshi to continue trading regardless. Chairman Michael Selig, Donald Trump's sole appointee left at the helm of the five-member commission, said 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."

Translation: a regulator appointed by a president who has bankrupted six casinos is now deploying Cold War-era emergency powers to protect a company that allows people to bet on who wins the Super Bowl.

This is not the first time the CFTC has put Kalshi in exactly this position. In July, after a Michigan state judge ordered Kalshi to cancel and refund sports-related bets, the CFTC directed the company not to comply. Robert Schwartz, the CFTC's former general counsel, told CNN the emergency powers had not been invoked in 46 years, and called the move "an assertion of federal power in financial markets like we haven't seen so far, by countermanding a court order."

The problem, as it turned out, was that Kalshi had already done what the Michigan judge asked. The trades were unwound. The refunds were issued. There was no mechanism to reverse it.

"We are disappointed by this decision and believe it is unfair to Kalshi," DeNault wrote publicly. The company's lawyers notified the Michigan judge that it remained in compliance with her order, even though its federal regulator was telling it not to be.

The CFTC's source-familiar-with-the-decision tried to save face: "This isn't about Kalshi and it certainly wasn't to help them." By that logic, the agency that protects $400 trillion in US derivatives markets decided to deploy its most extreme authority to make one of its own regulated entities' life harder.

The stakes are enormous. A coalition of 44 state attorneys general wrote to the CFTC in late July insisting the agency has no authority over sports-related event contracts. At least 14 states are actively litigating against prediction markets. The CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin.

Meanwhile, a consumer advocacy coalition including Better Markets, Demand Progress, Americans for Financial Reform, and Public Citizen argues the entire exercise is a regulatory end run. Their joint letter to the CFTC said the proposal "should be understood for what it is: a green light for these immense and largely unregulated financial speculation platforms to offer sports betting nationwide and aggressively market it to the public."

The numbers support their concern. Eighty-nine percent of Kalshi's total fee revenue comes from sports-related contracts. Seventy percent of users lose money. Seventy percent of all profits go to 0.04% of traders. The platform runs 24/7 on smartphones and markets heavily to young adults.

Public Citizen's Tyson Slocum called the CFTC's New York intervention "a massive overreach." After a federal court rejected Kalshi's request to continue offering its products to New Yorkers, Slocum said, "the CFTC has swooped in, declaring a phony emergency, and issued an order allowing Kalshi to defy federal courts and a US state."

The coalition also points out a structural problem: the CFTC has a budget frozen at $365 million to oversee $400 trillion in derivatives. Adding nationwide responsibility for sports betting, entertainment wagering, and political gambling on top of that is not an expansion of mission, it is an abandonment of it. The farmers, manufacturers, and energy companies who depend on well-functioning commodity markets are the ones who will pay the price.

The conflict of interest at the center of this is harder to miss if you look for it. Trump declared that the CFTC must have "exclusive authority" over prediction markets, calling it a "major industry" that "we must protect." The president who infamously bankrupted multiple casino operations has a company exploring how to cash in on the prediction market sector.

Then there is the insider trading problem. Just over a week before the CFTC's emergency order, CNN reported the agency was investigating a White House teleprompter operator, Gabriel Perez, for allegedly using advance knowledge of Trump's speech plans to profit on Kalshi. The White House placed Perez on unpaid administrative leave. The CFTC, which is supposed to prevent market manipulation, has almost nothing in its proposed rules to address insider trading on prediction markets, according to the consumer coalition.

Nicholas Jager, one of Kalshi's top traders, summarized the trader community's reaction in two words: "This is bonkers. As traders, we just want to know the rules. It would make me nervous to trade these markets if I was in a jurisdiction where this could happen."

Kalshi is now asking the Second Circuit Court of Appeals to use the CFTC's emergency order as grounds to shut down New York's lawsuit entirely. A source told CNN the CFTC's real goal was to prevent a "bad precedent" from influencing cases in other states. Fourteen states are fighting the same battle right now.

What we are watching is a federal regulator weaponize emergency authority to shield a company from democratic accountability. The company it is shielding says it is being hurt by the shield. The states say the regulator has no authority to issue it. The traders say the uncertainty makes them nervous. And the consumers say the whole thing is a backdoor for nationwide gambling that carries none of the protections gambling normally requires.

Nobody asked the CFTC to rescue Kalshi. Kalshi does not want to be rescued this way. But here we are, 46 years after the last time emergency powers were invoked, and the thing being saved from emergency is a sports betting app that 70% of users lose money on.