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Kalshi has lost its bid to block New York regulators from enforcing state gambling laws against its sports prediction contracts.
Judge Analisa Torres of the Southern District of New York, who famously ruled the landmark 2023 SEC v. Ripple Labs lawsuit, denied the company’s request for a temporary restraining order and preliminary injunction, ruling that New York’s authority over gambling remains intact even when Kalshi lists sports‑event contracts as a federally regulated exchange.
The case stems from Kalshi’s attempt to argue that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive jurisdiction over its products, leaving no room for state oversight.
The court disagreed, finding that Congress did not intend to strip states of their traditional police powers in gambling regulation. According to the opinion, New York’s laws are not preempted by federal statute, and Kalshi failed to show a clear likelihood of success on the merits.
Court’s reasoning on preemption and immunity
Judge Torres first addressed Eleventh Amendment immunity, dismissing the Gaming Commission itself from the case as a state agency shielded from suit. Claims against individual commissioners in their official capacities were allowed to proceed under Ex parte Young.
On the merits, the court applied the Supremacy Clause framework, examining express, field, and conflict preemption.
Kalshi argued that the Commodity Exchange Act gave the CFTC “exclusive jurisdiction” over swaps and event contracts, but the court noted that gambling regulation has historically been a matter of state police power.
The opinion emphasized that Congress included a savings clause in the statute, preserving state authority, and enacted a “Special Rule” allowing the CFTC to block contracts that involve unlawful activity under state law.
Judge Torres concluded that this structure showed Congress intended state gambling laws to coexist with federal oversight, not be displaced.
Kalshi and New York’s lengthy legal battle
Kalshi operates a prediction market where users trade event contracts, including sports outcomes such as tournament advancement or golf championships.
In January 2025, the company self‑certified several sports contracts with the CFTC and began listing them. New York law, however, requires any operator offering sports wagering to hold a license from the Gaming Commission.
By October 2025, the Commission issued a cease‑and‑desist letter, warning Kalshi to stop “illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platform in New York State.”
Kalshi responded by suing the Commission and its members, claiming federal law preempted state authority.
Tribal groups joined the case as amici, arguing Kalshi had “unlawfully and unfairly entered into the gaming market” and interfered with tribal sovereignty by offering sports contracts under the guise of commodity trading.
Injunction denied despite geolocation and compliance arguments
Because injunctive relief requires a strong showing of likely success, irreparable harm, and public interest, the court found Kalshi fell short.
Kalshi had also argued that its platform was federally compliant and that geolocation tools prevented New York residents from accessing sports contracts.
The court rejected this defense, noting that compliance with federal rules does not exempt Kalshi from state licensing requirements, and that geolocation technology does not shield the company from New York’s jurisdiction when its products are offered to the public.
“There is nothing preventing Kalshi from obtaining a license pursuant to New York law and establishing a category of New York market participants that does not discriminate within that New York-resident category,” Judge Torres wrote
The ruling adds to a patchwork of outcomes across the country and might affect several of such cases actively in court.
Expert iGaming lawyer Daniel Wallach shared on X that the decision could set off a chain reaction, predicting “domino effects” such as the CFTC losing its case against the New York Attorney General, Coinbase and Gemini enforcement matters being sent back to state court, a new enforcement action by the NYAG against Kalshi, and Kalshi together with the CFTC losing preliminary injunction motions in Connecticut.
