A federal judge in New York has denied a request from Kalshi for an injunction that would block the state from enforcing its sports betting laws against the prediction market’s sports event contracts.
That gives New York sports betting regulators a major win in the ongoing jurisdiction fight between state regulators and federally registered exchanges.
U.S. District Judge Analisa Torres ruled that the Commodity Exchange Act does not supersede New York’s gambling laws as applied to Kalshi’s sports contracts, rejecting Kalshi’s argument that its registration with the Commodity Futures Trading Commission as a designated contract market preempts state oversight. Torres previously denied Kalshi’s request for a temporary restraining order on July 7.
Kalshi has already appealed the decision to the U.S. Court of Appeals for the Second Circuit, setting up another appellate battle over whether prediction markets are federally regulated swaps or gambling subject to state law. The jurisdiction fight is more than likely headed to the U.S. Supreme Court.
Kalshi did not prove it could win
In her opinion, Torres wrote that “the CEA leaves room for states to regulate tangential issues that may arise from trading swaps and other financial products.” She also said that New York’s gambling laws “complement rather than conflict with federal law.”
She also noted Kalshi “has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits,” and that the state’s interests in preventing gambling addiction and preserving sports integrity outweigh Kalshi’s interests.
Torres said Kalshi retains the option to apply for a New York sports betting license, and that complying with state gambling laws “is not squarely contrary to federal law.” The ruling opens the way for state Attorney General Letitia James to pursue legal action against Kalshi.
New York’s response
Gov. Kathy Hochul and James issued a joint statement earlier this month welcoming the decision from earlier this month.
“New York’s gambling laws are designed to protect consumers. Kalshi tried to ignore them. Yesterday, they lost in court,” the statement said. “We will continue to hold all gambling platforms accountable to the law — and that includes prediction markets.”
The New York State Gaming Commission sent Kalshi a cease-and-desist letter in October alleging violations of New York’s gambling laws. Kalshi sued in response.
Other prediction markets legal battles
The New York ruling is only the latest in a series of recent prediction market legal decisions that have produced conflicting results across the country. Other rulings:
- Minnesota: A federal judge recently blocked Minnesota’s first-in-the-nation ban on prediction markets, finding that the CFTC, Kalshi and Polymarket had met their burden to show federal law likely preempts the state ban.
- Nevada: A state judge extended a temporary ban on Kalshi’s sports-related contracts, ruling the products were “indistinguishable” from gambling and prohibited for any non-licensee to engage in and Kalshi agreed to geofence its products from the state.
- New Jersey: The 3rd Circuit ruled in April that New Jersey regulators cannot prevent Kalshi from offering sports event contracts, holding they are CFTC-regulated swaps subject to exclusive federal jurisdiction. In turn, New Jersey regulators could ask for the Supreme Court to take up the issue.
- Washington: A federal court recently ruled Kalshi’s operations constituted illegal gambling.
New York’s decision keeps the state’s licensing framework intact and allows regulators to treat Kalshi’s sports contracts as gambling, even as the company appeals.
It also adds to the growing split among courts and states over whether prediction markets are federally preempted swaps or gambling products subject to state law. That makes an eventually trip to the Supreme Court more likely.
