A federal judge has refused to stop New York regulators from enforcing the state’s sports gambling laws against Kalshi, handing the prediction market operator another setback in its fight over whether federally regulated event contracts can sidestep state gaming rules.
In a 22-page opinion issued Tuesday (July 7), U.S. District Judge Analisa Torres found Kalshi had not shown it was likely to prevail on its argument that the Commodity Exchange Act overrides New York’s gambling laws. The judge also dismissed the New York State Gaming Commission from the case under Eleventh Amendment immunity while allowing the lawsuit to continue against the individual commissioners in their official capacities. “For the foregoing reasons, Kalshi’s motion for a preliminary injunction is DENIED,” Judge Torres wrote in the order’s conclusion.
BREAKING: Kalshi denied preliminary injunction in crucial Southern District of New York case by Judge Analisa Torres. Major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects in other cases (especially Connecticut and other SDNY lawsuits). pic.twitter.com/pLCobVo21S
— Daniel Wallach (@WALLACHLEGAL) July 8, 2026
The dispute traces back to October 2025, when the New York State Gaming Commission sent Kalshi a cease-and-desist letter accusing the company of offering unlicensed sports wagering through its federally regulated prediction market platform. Kalshi quickly sued, arguing that Congress gave the Commodity Futures Trading Commission exclusive authority over its exchange and that New York could not interfere with federally regulated derivatives trading.
The company began offering sports-event contracts in January 2025 after self-certifying them with the CFTC. Those products allow users to trade on outcomes including “which teams will advance in certain rounds of the NCAA College Basketball Championship or who will win the U.S. Open Golf Championship,” according to the opinion.
New York court rejects federal preemption claim made by Kalshi
Judge Torres concluded that Kalshi had not established a clear likelihood of success on its central legal argument.
“The merits of this case center on whether New York gambling laws are preempted by federal law as applied to Kalshi’s sports-event contracts,” the court wrote before concluding that “New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA.”
While the Commodity Exchange Act gives the CFTC broad oversight of derivatives markets, the court found that Congress did not intend to eliminate states’ traditional authority to regulate gambling. The opinion also rejected Kalshi’s claim that complying with New York’s licensing rules would create a conflict with federal law. “There is nothing preventing Kalshi from obtaining a license pursuant to New York law and establishing a category of New York market participants that does not discriminate within that New York-resident category,” Judge Torres wrote.
The court was equally unpersuaded by Kalshi’s argument that the CFTC’s decision not to block the contracts proved they were lawful. “The agency’s inaction is not proof that the sports-event contracts are regulated by or permissible under the CEA,” the court wrote, adding that New York’s gambling laws “complement rather than conflict with federal law.”
Judge Torres also found Kalshi had not demonstrated irreparable harm, describing its claimed injuries as “largely monetary” while calling concerns that the CFTC could revoke its exchange designation speculative.
The ruling arrives as New York weighs oversight of prediction markets. In April, Gov. Kathy Hochul signed an executive order barring state employees from using confidential government information to trade on prediction market platforms, saying insider trading on those exchanges threatens public trust.
At the same time, state Sen. Joseph Addabbo Jr. has told ReadWrite that prediction markets are already proliferating too quickly for lawsuits alone to contain them. Rather than relying solely on enforcement, Addabbo has proposed legislation that would establish a regulated framework for certain prediction markets while prohibiting contracts tied to sports, elections, disasters, deaths, and financial securities.
Featured image: Kalshi / Canva
