Federal judge denies Kalshi's bid to block New York gambling law enforcement

A federal judge has denied Kalshi's request to block New York from enforcing its gambling laws against the prediction market platform amid its ongoing battle against state regulators.

In a Tuesday ruling, Southern District of New York Judge Analisa Torres denied Kalshi's motion for a preliminary injunction in the lawsuit filed by the prediction market platform against the New York State Gaming Commission. Kalshi has since appealed the decision to the Second Circuit.

The dispute primarily centers on whether Kalshi's sports-event contracts fall under federal regulation or state gambling laws. The state gaming regulator argues that the contracts violate state gambling laws, while Kalshi contends that the federal Commodity Exchange Act (CEA) preempts those laws.

"[The] Court finds that New York gambling laws as applied to Kalshi's sports-event contracts are not preempted by the CEA and Kalshi has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits," Judge Torres wrote in the order.

The judge noted that the CEA still allows states to regulate certain related issues arising from trading swaps and other financial products on designated contract markets. 

"Given that the power to regulate gambling is a traditional police power exercised by New York, the Court also declines to interpret the CEA's grant of exclusive jurisdiction as leaving 'no room for supplementary state legislation,'" Torres wrote.

The judge also said that nothing is preventing Kalshi from obtaining a license under New York law.

"Although complying with New York gambling laws imposes an additional regulatory requirement on Kalshi, that requirement is not squarely contrary to federal law. Kalshi’s attempt, therefore, to avoid that requirement is unavailing," said the judge.

The Block has reached out to Kalshi for further comment on the case.

Sports law attorney Daniel Wallach wrote on social media platform X that the latest ruling will likely affect Kalshi's ongoing battle with over a dozen other U.S. state regulators.

"Major, major loss for Kalshi in the financial capital of the U.S., with likely knock-on effects in other cases," Wallach wrote.

CFTC v. states

Kalshi, federally regulated under the Commodity Futures Trading Commission, continues to fight U.S. state regulators seeking to ban sports-event contracts. 

Last month, a Michigan judge issued a temporary restraining order against Kalshi, blocking the platform from offering sports-related event contracts in the state.

Kalshi also sued the state of Illinois last month over its new law establishing a regulatory regime on prediction markets, imposing a 0.2% charge on the value of digital asset transactions or services provided to Illinois customers.

In April, the CFTC sued New York to block state enforcement against CFTC-registered exchanges. The agency is seeking a declaratory judgment that federal law grants it exclusive authority over event contracts, according to its statement.

Kalshi remains the largest prediction market platform in the world in trading volume, ahead of rival Polymarket. Kalshi's monthly volume reached $33 billion in June, while Polymarket and its U.S. platform saw a combined $13.95 billion, according to The Block's data dashboard.