Kalshi suffered a setback in its legal battle with New York regulators after U.S. District Judge Analisa Torres refused the company’s request for an emergency injunction while its appeal moves forward.
The ruling, issued on July 27 in KalshiEX LLC v. Williams, means Kalshi will not receive temporary protection from New York’s enforcement actions during the appeals process. However, the decision does not end the case or dismiss Kalshi’s appeal. The broader legal dispute will continue in the U.S. Court of Appeals for the Second Circuit.
Why the court rejected Kalshi’s request
Kalshi sought an injunction pending appeal after Judge Torres previously denied its request for a preliminary injunction on July 7. In that earlier ruling, she concluded that the Commodity Exchange Act (CEA) likely does not override New York’s gambling laws when applied to Kalshi’s sports-event prediction contracts.
To obtain emergency relief, Kalshi needed to demonstrate:
- A strong likelihood of success on appeal
- Irreparable harm without an injunction
- That the balance of equities favoured the company
- That granting relief would serve the public interest
Judge Torres ruled that Kalshi failed to satisfy these requirements.
Kalshi argued that it faced a difficult choice: either continue offering contracts and risk violating New York law, or comply with state restrictions and potentially harm its federally regulated business. The court found those concerns largely speculative and said that potential financial losses generally do not qualify as irreparable harm.
Court declines to follow proposed CFTC interpretation
Kalshi also pointed to a proposed rule issued by the Commodity Futures Trading Commission (CFTC) in June. The proposal argues that the Commodity Exchange Act preempts state laws regulating transactions conducted on CFTC-registered exchanges.
Judge Torres acknowledged the proposal but said courts must independently interpret federal law. Citing the Supreme Court’s Loper Bright decision, she stated that judges are not required to defer automatically to agency interpretations.
As a result, she maintained her earlier position that the Commodity Exchange Act does not necessarily override all state gambling laws affecting certain prediction-market contracts.
Appeal continues
The latest ruling applies only to Kalshi’s request in the district court. A separate emergency motion remains pending before the Second Circuit Court of Appeals, which could still decide to grant temporary relief.
The appeals court will also review the broader legal question of whether federal derivatives law preempts state gambling regulations in cases involving prediction markets.
Conflicting court decisions create uncertainty
The legal landscape remains divided.
Earlier this year, a federal appeals court in the Third Circuit ruled that New Jersey could not regulate Kalshi’s sports-event contracts because they fell under the CFTC’s exclusive jurisdiction. However, courts in New York and several other states have reached different conclusions.
The debate intensified further when a federal judge in Minnesota recently blocked that state’s direct ban on certain prediction-market contracts, suggesting that some may qualify as federally regulated swaps.
These conflicting rulings have left the legal status of sports prediction markets uncertain across the United States.
What’s next?
The immediate focus is now on the Second Circuit’s decision regarding Kalshi’s emergency appeal. After that, the court will consider the broader merits of the case and determine whether New York’s gambling laws can be applied to Kalshi’s contracts.
At the same time, the CFTC is reviewing public comments on its proposed prediction-market rules, which could eventually provide additional regulatory clarity. For now, however, the legal battle over prediction markets remains unresolved, with courts, regulators, and states continuing to disagree over who has authority to regulate these products.
