A federal judge has denied Kalshi’s request to prevent New York from enforcing its gambling statutes against the prediction market operator, and the company has already taken the fight to a higher court.
Southern District of New York Judge Analisa Torres rejected Kalshi’s motion for a preliminary injunction in KalshiEX LLC v. Williams on Tuesday. Kalshi filed a notice of appeal the same day, moving the case to the U.S. Court of Appeals for the Second Circuit.
The core legal question
At issue is whether Kalshi’s sports-event contracts qualify as federally regulated derivatives under the Commodity Exchange Act (CEA) or fall instead under state gambling law. The New York State Gaming Commission argues the contracts violate state statutes, while Kalshi maintains that its status as a CFTC-regulated exchange preempts local enforcement.
Torres sided with the state. “The Court finds that New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA and Kalshi has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits,” she wrote in her order.
The judge noted that the CEA leaves room for states to regulate related aspects of swaps and other financial products traded on designated contract markets.
“Given that the power to regulate gambling is a traditional police power exercised by New York, the Court also declines to interpret the CEA’s grant of exclusive jurisdiction as leaving ‘no room for supplementary state legislation,’” Torres wrote.
She also pointed out that Kalshi retains the option of applying for a New York license. “Although complying with New York gambling laws imposes an additional regulatory requirement on Kalshi, that requirement is not squarely contrary to federal law. Kalshi’s attempt, therefore, to avoid that requirement is unavailing,” the order states.
The opinion acknowledged that courts elsewhere have reached different conclusions on similar Kalshi requests, with some granting injunctions against state enforcement and others denying them.
Sports and gaming law attorney Daniel Wallach described the outcome as consequential for Kalshi’s other pending disputes.
On social media platform X, he wrote: “Major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects in other cases.” He later added that Connecticut and other SDNY lawsuits stand out as likely to feel the effects of the ruling.
New York Attorney General Letitia James has disputed Kalshi’s preemption argument, and her office is expected to pursue a civil enforcement action against the company in state court, seeking restitution, disgorgement, civil penalties, and injunctive relief.
A multi-state legal front
New York is one of more than a dozen jurisdictions where Kalshi faces regulatory or legal challenges over its sports-related contracts. Last month, a Michigan judge issued a temporary restraining order barring Kalshi from offering sports-event contracts in that state.
Kalshi has also sued Illinois over a new law imposing a 0.2% charge on the value of digital-asset transactions or services provided to state customers, arguing the statute conflicts with CFTC oversight.
A Minnesota federal judge sided with state officials who contend that prediction market platforms have gone beyond what Congress intended when it established the CFTC’s regulatory framework in 1974.
In Kentucky, Attorney General Russell Coleman filed suit against both Kalshi and Polymarket, alleging the platforms offer illegal sports betting subject to state gambling law rather than federal financial regulation.
Wisconsin sued Kalshi along with Robinhood, Coinbase, Polymarket, and Crypto.com in April, alleging the companies facilitated illegal sports betting through their event-contract offerings. Nevada regulators have pursued comparable actions against Kalshi, Coinbase, and Polymarket.
The CFTC has taken the opposite position at the federal level. In April, the agency sued New York, seeking a declaratory judgment that federal law grants it exclusive authority over event contracts.
In May, the CFTC backed Kalshi in an Ohio federal appeals court after having sued five states — Wisconsin, New York, Arizona, Connecticut, and Illinois — to assert jurisdiction over prediction markets.