U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi’s motion for a preliminary injunction on July 7, finding that the Commodity Exchange Act does not preempt New York’s gambling law under express, field, or conflict-preemption theories. The ruling left New York able to pursue enforcement against the CFTC-registered exchange.
Kalshi argued that its status as a CFTC-designated contract market prevented New York from applying its gambling laws. Torres rejected that position, pointing to the Commodity Exchange Act’s savings clause and the Dodd-Frank Act’s Special Rule, which authorizes the CFTC to prohibit event contracts tied to gaming or unlawful activity. On conflict preemption, the court found that New York law did not prevent Kalshi from seeking a state gambling license.
Kalshi filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit on the day of the ruling. On July 29, the appeals court rejected Kalshi’s request to avoid being subjected to New York’s gambling laws while its appeal proceeds.
New York Attorney General Letitia James sued Kalshi on July 31 in a petition filed in Manhattan state court. The petition alleges that Kalshi failed to obtain a New York State Gaming Commission license for a platform where users trade on the predicted outcomes of sports, elections and other events. According to the petition, the contracts constitute gambling because users can wager on events whose outcomes they do not control.
The state seeks to halt Kalshi’s alleged unlawful conduct, forfeit alleged illegal gains, obtain civil fines equal to triple those gains, and provide restitution to customers. The petition also raises concerns that the platform allows users aged 18 to 20, while New York’s minimum age for mobile sports betting is 21.
Hochul and James said in a joint statement that New York’s gambling laws are intended to protect consumers and that the state will hold gambling platforms, including prediction markets, accountable under those laws.
The dispute is part of a broader legal battle over whether states may regulate prediction-market contracts offered on federally registered exchanges. The CFTC has asserted exclusive oversight of prediction-market contracts and has challenged regulatory activity in at least nine states, including New York. Less than an hour before New York filed its petition against Kalshi, the CFTC filed an emergency motion in Manhattan federal court seeking to stop the state’s enforcement activity.
Other states have also secured court orders restricting Kalshi’s activities, including Massachusetts, Michigan, Nevada and Washington. The New York case adds to the continuing conflict between state gambling enforcement and the federal regulatory framework for prediction-market contracts.
Petra Vanhoof has spent the better part of a decade following the shifting tides of gambling regulation across Europe and beyond. She came up through the compliance side of the industry before pivoting to writing, which gives her a grounded, no-nonsense perspective on the rules, loopholes, and political maneuvering that shape how operators actually do business. She is particularly drawn to the gap between what regulators say and what the market ends up doing in response.