Kalshi lost an early court fight in New York over its sports event contracts after Judge Analisa Torres of the Southern District of New York denied the company’s request for a preliminary injunction. The ruling keeps New York’s gambling-law claims alive and allows the case to continue into the motion-to-dismiss stage instead of stopping it at the outset.
At the center of the dispute is whether New York gambling laws can be applied to Kalshi’s sports event contracts. Kalshi argued that the Commodity Exchange Act, or CEA, gives the Commodity Futures Trading Commission exclusive authority over its federally regulated contracts, leaving no room for state gambling restrictions.
Judge rejects Kalshi’s preemption theory at this stage
Legal analyst Daniel Wallach said the court found that New York gambling laws, as applied to Kalshi’s sports event contracts, are not preempted by the CEA. The court also held that Kalshi had not made a clear showing that it was likely to succeed on the merits, a key requirement for winning preliminary relief.
Judge Torres also pointed to the longstanding role of states in policing gambling activity. In Wallach’s account of the order, the court said that laws regulating gambling and lotteries are clearly matters of predominantly state concern. That finding cuts against Kalshi’s claim that federal law fully displaces state oversight in this area.
CFTC jurisdiction does not erase all state authority
The ruling does not end the lawsuit. It only denies Kalshi’s attempt to secure early relief while the broader case is still being argued. Even so, the order pushes back on one of the company’s central legal arguments. Wallach said the court described the CFTC’s exclusive jurisdiction under the CEA as “not without limits”.
The court also said federal law does not require designated contract markets to offer identical contracts nationwide. That matters because Kalshi had argued that state-by-state restrictions would conflict with federal access rules. For now, Judge Torres rejected that view, saying New York’s licensing regime may impose an added obligation but is not directly contrary to federal law.
Broader battle over prediction markets is intensifying
The decision comes as prediction markets face growing legal and policy disputes across the United States. The CFTC has sued several states, including New Mexico, seeking to block the application of state gaming laws to federally regulated prediction market contracts.
The issue has also become a major topic for regulators and the industry. At Consensus Miami, CFTC Chairman Michael Selig said the conflict could eventually reach the U.S. Supreme Court, with states continuing to treat some sports-related contracts as gambling products. Gaming groups have also stepped in, urging Congress through the CLARITY Act to exclude sports and casino-style prediction markets from CFTC oversight.
For Kalshi, the New York loss adds pressure at a time when sports contracts account for a large share of activity on the platform. Earlier reporting said sports-related contracts recently made up about 65% of Kalshi’s total volume, even as the company kept courting investors while facing lawsuits in multiple states.