A federal judge has denied a preliminary injunction request by Kalshi, ruling that the platform cannot block the New York State Gaming Commission from enforcing state gambling laws while their legal battle proceeds. Kalshi, the world’s largest regulated prediction market by volume, posting a record $33 billion in June activity, immediately appealed the decision to the Second Circuit.
The core dispute rests on legal preemption. Kalshi argues that because it is regulated federally by the Commodity Futures Trading Commission (CFTC), the federal Commodity Exchange Act (CEA) overrides state-level prohibitions.
However, Southern District of New York Judge Analisa Torres rejected that stance. She ruled that the CEA leaves room for supplementary state legislation, noting that anti-gambling enforcement is a traditional state police power. Complying with local gaming laws may add regulatory friction, but it does not directly contradict federal law.
The decision threatens to trigger a domino effect across the US, where Kalshi is fighting a multi-front war. Alongside a recent restraining order in Michigan and a taxation lawsuit in Illinois, the CFTC itself has sued New York, seeking exclusive authority over event derivatives. This ruling strengthens the hand of state regulators aiming to curb financialized sports contracting.
