Federal Judge Rejects Kalshi’s Bid to Block New York From Enforcing Gambling Laws on Sports Contracts
A New York federal judge ruled Kalshi's CFTC registration doesn't shield it from state gambling laws, dealing the prediction market a major legal setback.
A federal judge in New York dealt Kalshi a significant legal setback this week, rejecting the prediction market operator’s request to block state regulators from enforcing gambling laws against its sports-event contracts. U.S. District Judge Analisa Torres of the Southern District of New York ruled Tuesday that Kalshi’s status as a designated contract market registered with the Commodity Futures Trading Commission does not exempt it from New York’s state gambling statutes.
The decision resolves, for now, a fight that began last October when the New York State Gaming Commission ordered Kalshi to stop offering sports-related contracts to New York residents, arguing the products fall under the state’s gambling laws. Kalshi sued to block that enforcement action, arguing that federal law under the Commodity Exchange Act preempts any state effort to regulate contracts traded on a CFTC-registered exchange.
The Court’s Reasoning
Torres rejected that argument directly. “Congress did not intend to preempt all state actions that may relate to DCMs,” she wrote in her ruling. “Instead, the CEA leaves room for states to regulate tangential issues that may arise from trading swaps and other financial products on DCMs.” The judge went on to find that New York’s gaming laws “complement rather than conflict with federal law,” and that the CFTC’s decision not to exercise its own authority over Kalshi’s sports contracts doesn’t automatically block the state from stepping in.
New York Gov. Kathy Hochul and Attorney General Letitia James issued a joint statement following the ruling, framing it as a vindication of the state’s consumer protection authority. “New York State’s gambling laws were enacted to protect consumers,” the statement read. “Kalshi tried to ignore them. Yesterday, they lost in court. We will continue to hold all gambling platforms accountable to the law—and that includes prediction markets.”
What It Means for the Broader Fight
The ruling only applies to New York for now, and it addresses a preliminary injunction request rather than resolving the underlying case, which will proceed to further litigation. Kalshi remains free to continue operating in states like New Jersey and Tennessee, where it has secured more favorable rulings, and the decision doesn’t touch its non-sports contracts covering elections, economic data, or other event categories.
Still, the New York decision adds significant weight to a growing list of states pushing back against prediction markets’ sports offerings, and it arrives just weeks ahead of a CFTC public comment deadline on proposed event-contract rules. Kalshi has already moved to appeal, sending the New York ruling to the Second Circuit, adding another appellate court to the list weighing in on how far CFTC oversight extends into territory traditionally governed by state gambling law. With multiple circuit courts now considering versions of this same question, the odds of a Supreme Court resolution to the prediction markets fight continue to climb.