Kalshi loses bid to block New York sports betting rules

U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction that would have stopped New York from enforcing its gambling laws against the company’s sports-event contracts. The decision keeps state restrictions in place while the lawsuit proceeds, a setback for prediction-market operators arguing that federal commodities oversight preempts state betting rules.

Kalshi, which is registered with the Commodity Futures Trading Commission as a designated contract market, has already filed a notice of appeal to the U.S. Court of Appeals for the 2nd Circuit. No monetary damages were disclosed in the ruling, but the practical issue is direct: whether Kalshi can keep offering sports outcome contracts in New York without a state sports-wagering license.

New York can enforce its rules for now

The dispute began after the New York State Gaming Commission ordered Kalshi in October to stop offering, advertising or otherwise making available an unlicensed mobile sports wagering platform tied to sports events in the state. Kalshi sued, arguing that its contracts are swaps under federal law and therefore fall under the CFTC’s exclusive jurisdiction.

Torres did not decide, for purposes of the injunction request, whether the sports-event contracts are swaps. Instead, she found that Kalshi had not shown it was likely to win on its preemption theory, one of the requirements for the injunction it sought.

The judge wrote that gambling regulation is an area traditionally handled by states, which triggers a presumption against reading federal law to wipe out state authority unless Congress clearly intended that result. She found no such clear intent in the Commodity Exchange Act.

Torres also said the CFTC’s decision not to restrict Kalshi’s sports contracts does not, by itself, block New York from enforcing gambling laws. In her view, New York’s gaming rules can operate alongside federal commodities law rather than conflicting with it.

Gov. Kathy Hochul and Attorney General Letitia James said in a joint statement that New York’s gambling laws are meant to protect consumers and that Kalshi had tried to ignore them. They said the state would continue applying those rules to gambling platforms, including prediction markets.

A split building around prediction markets

Kalshi began listing sports-event contracts in January 2025, including contracts tied to the NCAA basketball tournament and the U.S. Open golf tournament. New York officials have argued that residents could be harmed by unsupervised sports gambling, especially people ages 18 to 24. State law also bars wagering on sports involving New York-based college teams.

The New York ruling lands in a broader fight over whether sports prediction markets are federally regulated derivatives products, state-regulated gambling products, or both. The CFTC has taken a more permissive approach than several states and has sued states in an effort to preempt restrictions on prediction markets.

Kalshi has not received a uniform answer from the courts. In April, the 3rd Circuit ruled in a Kalshi case that New Jersey could not regulate sports bets on prediction markets. In another case, the 6th Circuit declined to grant Kalshi a preliminary injunction against Ohio gambling laws.

Those divergent outcomes increase the chance that the Supreme Court will eventually be asked to draw the line between CFTC jurisdiction and state gambling authority. Until then, prediction-market companies face a state-by-state enforcement map, even when operating under a federal market designation.

This story draws on original reporting from Ars Technica.