TheBlock
A federal judge on Tuesday denied Kalshi's request for a preliminary injunction blocking New York from enforcing its gambling laws against the prediction market platform. Southern District of New York Judge Analisa Torres ruled that Kalshi's sports-event contracts are not protected from state regulation by federal law, handing the venue a significant defeat in the country's financial capital.
Torres wrote that Kalshi had not made a "clear or substantial showing" that it is likely to succeed on the merits, because New York's gambling power as applied to those contracts is not preempted by the Commodity Exchange Act. The judge emphasized that the CEA's grant of exclusive jurisdiction still leaves "no room" read out of the statute, and noted nothing prevents Kalshi from obtaining a state license.
Kalshi has already appealed the ruling to the Second Circuit, and the case now sits in a fast-widening pile of prediction-market litigation across more than a dozen U.S. states. A Michigan judge issued a temporary restraining order against Kalshi last month, and Kalshi filed its own suit against Illinois over a new state law imposing a 0.2% transaction charge on digital-asset activity tied to Illinois customers. The CFTC itself sued New York in April seeking a declaratory judgment that federal law gives it exclusive authority over event contracts.
Why it matters
The ruling lands in the highest-profile venue possible for any prediction-market fight: a Southern District of New York courtroom, with a CFTC-registered exchange on one side and a state gaming regulator on the other. Sports-law attorney Daniel Wallach called it a "major, major loss" with "likely knock-on effects" across Kalshi's other state cases, including the Michigan restraining order and the Illinois suit.
The legal theory Kalshi needs to win is federal preemption: that the CEA, which gives the CFTC exclusive jurisdiction over swaps traded on designated contract markets, blocks states from policing those same products as gambling. Torres read the statute the other way, leaning on the traditional police power states hold over gambling.
Frequently asked questions
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What did the federal judge actually rule in the Kalshi vs. New York case?
SDNY Judge Analisa Torres denied Kalshi's motion for a preliminary injunction, ruling that New York's gambling laws as applied to Kalshi's sports-event contracts are not preempted by the Commodity Exchange Act and that Kalshi had not made a clear or substantial showing of likely success on the merits.
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What is Kalshi's legal argument against state gambling enforcement?
Kalshi argues that because it is federally regulated by the CFTC as a designated contract market, the Commodity Exchange Act preempts state gambling laws from being applied to its sports-event contracts. Torres rejected that reading and noted Kalshi could obtain a state license.
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How does this ruling affect Kalshi's other state-level disputes?
Sports-law attorney Daniel Wallach called it a "major, major loss" with "likely knock-on effects" in Kalshi's other cases. A Michigan judge already issued a temporary restraining order against the platform last month, and Kalshi is separately suing Illinois over a new state law imposing a 0.2% transaction charge.
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What is the CFTC's role in the broader prediction-market fight?
The CFTC filed its own lawsuit against New York in April seeking a declaratory judgment that federal law gives it exclusive authority over event contracts. That parallel federal case remains pending and was not affected by Torres's Tuesday ruling on Kalshi's specific motion.
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How large is Kalshi compared to rival prediction markets?
Kalshi remains the largest prediction market globally by trading volume, posting $33 billion in June versus a combined $13.95 billion for Polymarket and its U.S. platform, according to The Block's data dashboard.
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