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A federal judge has denied Kalshi‘s request to block New York from enforcing its gambling laws against the company’s sports event contracts, marking another significant development in the growing legal battle over whether prediction markets fall under federal commodities regulation or state gambling laws.
U.S. District Judge Analisa Torres ruled that Kalshi failed to show it was likely to succeed on its claim that federal law preempts New York’s authority to regulate its sports-related contracts.
The decision allows state regulators to continue treating those products as unlicensed gambling while the case moves forward. Kalshi has already appealed the ruling to the US Court of Appeals for the Second Circuit.
Kalshi’s federal protection argument falls short in NY court
The dispute began after the New York State Gaming Commission issued Kalshi a cease-and-desist order, alleging the company was offering unlicensed sports wagering. Kalshi responded by suing state regulators, arguing its event contracts are federally regulated derivatives overseen by the Commodity Futures Trading Commission rather than gambling products subject to state licensing requirements.
Torres rejected that argument, concluding that the Commodity Exchange Act does not override New York’s gambling laws as applied to Kalshi’s sports event contracts. The judge also found that Kalshi had not demonstrated it would be impossible to comply with both federal commodities law and New York’s gambling regulations.
In weighing the request for a preliminary injunction, Torres wrote that New York’s interests in preventing gambling addiction, protecting the integrity of sports and avoiding unregulated betting markets outweighed Kalshi’s arguments for exclusive federal oversight.
Hochul and James: Ruling a win for consumer protections
Gov. Kathy Hochul and Attorney General Letitia James praised the ruling, saying New York’s gambling laws are intended to protect consumers.
In a joint statement reported on by Spectrum News NY 1, the officials said Kalshi attempted to sidestep those laws and vowed to continue enforcing state gambling regulations against all operators, including prediction market platforms.
Kalshi appeal could shape future of prediction markets
Kalshi has appealed Torres’ decision, signaling that the broader legal battle is far from over.
The company maintains that the CFTC has exclusive authority over designated contract markets such as Kalshi, while New York argues states retain the power to regulate products that function as gambling under state law.
The case is part of a wider conflict between federal and state regulators over prediction markets. The CFTC has asserted that it has exclusive jurisdiction over commodity derivatives, including prediction markets, and has challenged regulatory actions taken by New York and several other states.
Meanwhile, states continue to argue they have authority to enforce their own gambling laws when event contracts resemble traditional sports betting, according to Reuters news reporting.
ORACLE Act seeks new rules for prediction markets
State Sen. Joseph Addabbo, who chairs the Senate Racing, Gaming and Wagering Committee, has argued that New York should establish a clear legal framework for prediction markets rather than rely solely on litigation.
Addabbo introduced Senate Bill S9414, known as the Oversight and Regulation of Activity for Contracts Linked to Events (ORACLE) Act. The proposal would prohibit prediction markets tied to sporting events, elections, deaths, catastrophic events and securities. It would also:
- Restrict participation to adults 21 and older
- Bar trading by people with insider knowledge or conflicts of interest
- Establish a voluntary self-exclusion program
- Impose advertising and market-making restrictions
- Prohibit market manipulation and insider trading
- Restrict certain credit-based payment methods and gift certificates
- Authorize the state attorney general to adopt rules governing prediction market platforms
The bill advanced out of the Senate Racing, Gaming and Wagering Committee in May and remains under consideration in the Senate Finance Committee. While the bill’s future remains uncertain, Kalshi’s appeal ensures the legal debate over prediction markets and state gambling authority will continue.
For now, the ruling represents an important victory for New York regulators and another key decision in the rapidly evolving dispute over how prediction markets should be regulated in the United States.
