The Federal District Court for the Southern District of New York denied the prediction platform Kalshi a preliminary injunction against the New York State Gaming Commission. Judge Analisa Torres ruled that New York's gambling laws are not preempted by the federal Commodity Exchange Act (CEA), and Kalshi failed to demonstrate a clear likelihood of success on the merits of the case. The platform's management has already filed an appeal with the Second Circuit Court.
This verdict is just one battle in Kalshi's larger war with regulators in more than ten U.S. states. The key issue in the dispute is whether Kalshi's sports contracts fall under federal regulation by the CFTC or under state jurisdiction. Judge Torres sided with New York, emphasizing that the CEA still leaves room for states to regulate related issues arising from the trading of swaps and other financial products. Since gambling regulation is a traditional state power, the court refused to interpret the exclusive jurisdiction of federal law as "leaving no room for state legislation."
Dual Regulation or Legal Conflict?
The judge also noted that Kalshi could obtain a license under New York law, and compliance with local regulations does not conflict with federal law. In other words, the platform's attempt to avoid licensing and additional regulatory requirements was deemed untenable. According to experts, Judge Torres's decision could set a precedent for similar disputes between Kalshi and other states.
Recall that earlier, a Michigan court had already imposed a temporary ban on offering Kalshi's sports contracts in the state. Around the same time, the platform filed a lawsuit against Illinois over a new 0.2% tax on digital asset transactions for state clients. Notably, the federal regulator CFTC sided with the platform and filed a lawsuit against New York in April, seeking to establish the exclusive authority of federal law over event contracts. However, the latest court ruling casts doubt on this position.
Despite the regulatory battles, Kalshi remains the world's largest prediction platform by trading volume, outpacing Polymarket. In June, monthly trading volume reached $33 billion.
My analysis: This ruling is a serious signal for the entire event contracts industry. It confirms that federal registration with the CFTC is not a "free pass" to bypass local laws. Kalshi will either have to adapt to the patchwork of state regulatory requirements, which is costly and complex, or seek victory on appeal, which will drag on for months. For investors, this means increased legal risks for platforms operating in the gray area between gambling and derivatives. The prediction market faces a period of consolidation and, likely, stricter rules of the game.