Federal Judge Denies Kalshi Request to Block New York Rules

NEW YORK: A federal judge has denied Kalshi’s request to block New York from enforcing state gambling laws against the prediction market company.

The ruling is another major test of whether sports event contracts should be treated as federally regulated financial products or state-regulated gambling.

U.S. District Judge Analisa Torres in Manhattan denied Kalshi’s request for a preliminary injunction. Kalshi had argued that its event contracts fall under federal commodities law and should not be subject to New York gaming regulations.

Judge Rejects Preemption Argument

Torres ruled that Kalshi had not shown it was likely to succeed on the merits of its claim. The company argued that the Commodity Exchange Act preempted New York gambling laws as applied to Kalshi’s sports event contracts.

The judge disagreed, allowing New York’s enforcement position to remain in place while the case continues. Other federal courts have split on related prediction market questions, meaning the legal fight is likely to continue beyond the New York ruling.

Kalshi sued after the New York State Gaming Commission sent the company a cease-and-desist letter last fall. State officials argued that Kalshi was offering unlicensed sports gambling through its sports event contracts.

Kalshi has maintained that it is not a sports betting company and that its products are federally regulated event contracts. The company has appealed the decision to the federal appeals court in Manhattan.

New York Officials Welcome Ruling

Gov. Kathy Hochul and Attorney General Letitia James welcomed the ruling in a joint statement on the Kalshi ruling. They said New York’s gambling laws are designed to protect consumers and that Kalshi had tried to ignore them.

“We will continue to hold all gambling platforms accountable to the law – and that includes prediction markets”, Hochul and James said.

A Kalshi spokesperson said the company respectfully disagreed with the court’s decision and was considering all legal options. The company’s appeal means the dispute could move quickly into the next phase.

The ruling comes as the Commodity Futures Trading Commission is also challenging New York over its ability to regulate prediction markets. The CFTC has argued that it has exclusive oversight of commodity derivatives markets, including prediction markets.

Prediction Market Fight Expands

Prediction markets allow users to trade contracts tied to the outcome of real-world events. Kalshi and other platforms have offered markets involving sports, elections and other public events, raising questions about the line between financial contracts and gambling products.

New York has also taken action against Coinbase Financial Markets and Gemini Titan, accusing the companies of promoting unlicensed gambling through event contracts. Those actions show that the state’s position is not limited to Kalshi.

The New York ruling adds to a growing state-level fight over sports-related prediction markets. Michigan recently temporarily blocked KalshiEX sports betting products, while Washington also sued Kalshi for alleged illegal sports betting.

The dispute also feeds into the wider prediction market debate, where regulators, operators and courts are testing whether sports event contracts should be treated as financial products or sports wagers.

Licensing Question Remains

Legal analysts have said Kalshi’s options include continuing to fight in federal court, seeking relief from higher courts or pursuing a New York-issued sports betting license. New York currently has a limited number of mobile sports betting licenses, making any licensing route politically and commercially complex.

State Sen. Joseph Addabbo, chair of the Senate Committee on Racing, Gaming and Wagering, said regulation should be a legislative priority. He said the absence of guardrails and protocols creates issues for people affected by gambling addiction.

The ruling does not end the broader legal conflict over prediction markets. It does, however, strengthen New York’s position that state gambling laws can apply to sports event contracts when those products are offered to residents.

For the gambling industry, the case is important because it could influence how other states respond to prediction markets. For Kalshi, the decision raises the stakes of its appeal and keeps state enforcement risk at the center of its sports event contract business.

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