Kalshi has suffered an early legal setback in its battle over sports event contracts in New York, after a federal judge denied the company’s request for a preliminary injunction.
According to legal analyst Daniel Wallach, Judge Analisa Torres of the U.S. District Court for the Southern District of New York rejected Kalshi’s effort to halt the state’s case while litigation continues. The decision allows New York’s claims to proceed to the next stage rather than being dismissed at the outset.
The dispute centers on whether New York gambling laws can be applied to Kalshi’s sports event contracts. Kalshi argues that its products fall under the exclusive authority of the U.S. Commodity Futures Trading Commission (CFTC) because they are federally regulated event contracts under the Commodity Exchange Act (CEA).
However, Judge Torres ruled that Kalshi had not demonstrated a strong likelihood of success on its argument that federal law preempts New York’s gambling regulations. The court stated that gambling regulation has traditionally been an area of state authority and that New York’s laws remain relevant when applied to sports-related contracts.
The ruling does not determine the final outcome of the case, but it represents an important early victory for New York regulators. The court also noted that the CFTC’s jurisdiction is not unlimited and that federal law does not necessarily require prediction market contracts to be offered uniformly across all states.
The decision adds to growing legal and regulatory pressure on Kalshi as prediction markets face increased scrutiny nationwide. Several states have challenged the company’s sports-related contracts, arguing that they function similarly to sports betting and should be subject to state gaming laws.
At the same time, the broader debate over prediction markets continues to intensify. The CFTC has challenged state attempts to regulate federally approved prediction contracts, while gaming industry groups have urged Congress to clarify the distinction between prediction markets and traditional gambling.
The New York case is particularly significant because sports event contracts have become a major part of Kalshi’s business. Recent reports indicate that sports-related markets account for roughly 65% of the platform’s total trading volume.
As the legal battle continues, the outcome could have major implications for the future regulation of prediction markets in the United States and the balance of power between federal regulators and state gaming authorities.
