Nikolas Sargeant
TL;DR
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A federal judge denied Kalshi's request to stop New York from enforcing its gambling laws against the prediction market platform.
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The court ruled that federal commodities law does not override New York's authority to regulate sports-event contracts under its gambling laws.
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Kalshi has appealed the decision, while legal experts say the ruling could influence similar disputes in other states.
Prediction market platform Kalshi has suffered a major legal setback after a federal judge declined to block New York from enforcing its gambling laws against the company.
In a ruling issued Tuesday, Judge Analisa Torres of the Southern District of New York denied Kalshi's request for a preliminary injunction in its lawsuit against the New York State Gaming Commission. The company has already appealed the decision to the U.S. Court of Appeals for the Second Circuit.
The case is one of several legal battles that could shape how prediction markets are regulated across the United States.
Court Rules Federal Law Does Not Override State Gambling Regulations
The central issue in the dispute is whether Kalshi's sports-event prediction contracts fall exclusively under federal oversight or remain subject to state gambling laws.
Kalshi argues that its contracts are regulated under the Commodity Exchange Act (CEA) and supervised by the Commodity Futures Trading Commission (CFTC), meaning federal law should preempt state regulation.
However, Judge Torres disagreed. In her ruling, she concluded that New York's gambling laws, as applied to Kalshi's sports-event contracts, are not preempted by the CEA. As a result, the company failed to demonstrate that it was likely to succeed on the merits of its legal challenge.
The judge also emphasized that regulating gambling has traditionally been a state responsibility and found no basis for interpreting the CEA as eliminating New York's authority to enforce its own gambling statutes.
The court further noted that Kalshi is not prevented from operating in New York if it complies with the state's regulatory requirements.
According to the ruling, obtaining a license under New York law would impose additional compliance obligations, but those requirements do not conflict with federal law.
The decision suggests that federal registration alone does not exempt prediction market operators from state gambling regulations where applicable.
Kalshi has not publicly commented on the ruling beyond filing its appeal.
Legal Experts Expect Broader Impact
Sports law attorney Daniel Wallach described the decision as a significant defeat for Kalshi, arguing that it could influence similar legal disputes unfolding across multiple states.
The platform is currently facing regulatory challenges from more than a dozen U.S. jurisdictions seeking to restrict or prohibit sports-event prediction contracts.
The New York ruling could strengthen the position of other state regulators pursuing comparable enforcement actions.
The New York case is only one of several ongoing legal disputes involving the company. Last month, a Michigan judge issued a temporary restraining order preventing Kalshi from offering sports-related event contracts in the state.
Kalshi also filed a lawsuit against Illinois after the state introduced legislation creating a regulatory framework for prediction markets, including a 0.2% fee on the value of digital asset transactions and related services provided to Illinois customers.
The platform also sued Minnesota after the state banned prediction markets.
Meanwhile, the Commodity Futures Trading Commission (CFTC) filed its own lawsuit against New York in April, seeking a declaratory judgment affirming that federal law grants the agency exclusive authority over event contracts traded on federally regulated exchanges.
That separate case remains ongoing.
Despite mounting legal challenges, Kalshi continues to dominate the prediction market industry by trading volume.
According to industry data, the platform recorded approximately $33 billion in monthly trading volume during June, maintaining a sizable lead over rival Polymarket, whose combined global and U.S. platforms generated around $13.95 billion in trading volume during the same period.
The outcome of Kalshi's legal battles with state regulators could have significant implications for the future regulation of prediction markets across the United States.
Kalshi is in early discussions with investment banks regarding a potential initial public offering (IPO), according to a report from The Information.
