Meta description: Kalshi remains exposed to New York gambling enforcement after Judge Analisa Torres and the Second Circuit denied injunction relief.

Tags: Kalshi, CFTC, New York State Gaming Commission, Letitia James, Commodity Exchange Act, Sports Event Contracts

Market platform: Kalshi

Category: Regulation

Kalshi has not stopped New York from applying state gambling law to its sports-event contracts. U.S. District Judge Analisa Torres denied KalshiEX LLC’s request for a temporary restraining order and preliminary injunction in KalshiEX LLC v. Williams, No. 1:25-cv-08846, and the Second Circuit has also denied emergency injunction relief, the Times Union reported July 31.

What did the New York federal court decide?

Torres denied Kalshi’s bid to block New York gaming officials from enforcing state gambling laws against its sports-related event contracts. The Southern District of New York’s docket says the court filed its opinion and order on July 7, 2026, and issued a July 13 order correcting a scrivener’s error in the opinion.

The ruling turned on Kalshi’s preemption argument. Kalshi argued that its contracts trade on a federally regulated designated contract market, putting them within the Commodity Futures Trading Commission’s exclusive jurisdiction under the Commodity Exchange Act. New York regulators argued that sports-event contracts offered to New York users still fall within state gambling authority when they operate like sports wagering.

Torres did not enter a final judgment on the merits. She denied interim relief, which leaves the state free to continue pressing its view while the case proceeds. That distinction matters for Kalshi’s New York operations because preliminary relief would have paused enforcement risk during the litigation.

The court record also ties the case directly to the New York State Gaming Commission’s October 24, 2025 cease-and-desist letter. The amended opinion says the commission directed Kalshi to stop “illegally operating, advertising, promoting, administering, managing, or otherwise making available an unlicensed mobile sports wagering platform in New York State in connection with any sports event.”

Why does New York say sports-event contracts are gambling?

New York’s position is that the legal label does not decide the substance of the transaction. The state says sports-event contracts can constitute sports wagering when customers put money on the outcome of games or athletic performance without a license from the New York State Gaming Commission.

The attorney general’s office took a similar position in April against Coinbase Financial Markets and Gemini Titan. In an April 21, 2026 release, Attorney General Letitia James said the companies let users bet money on events including sports, entertainment and elections, and operated without New York State Gaming Commission licenses.

James’ office also identified an age issue. The release said Coinbase and Gemini opened prediction markets to New Yorkers over 18, while New York requires mobile sports-betting users to be at least 21. The lawsuits sought court orders requiring the companies to pay fines, forfeit illegal profits and provide restitution to customers.

The Coinbase and Gemini cases did not name Kalshi. Kalshi’s case arose from its own dispute with New York gaming officials after the commission’s cease-and-desist letter. The common question is whether state gambling law can reach event contracts listed by entities that frame themselves as federally regulated prediction markets. New York says state gambling rules still apply. Kalshi says federal commodities law preempts that enforcement.

How is the CFTC defending federal jurisdiction?

The CFTC has taken a broad federal-jurisdiction position in parallel litigation. In an April 24, 2026 press release, the agency said it sued New York in the Southern District of New York to stop the state from applying gambling laws against CFTC-registered contract markets.

The CFTC said its complaint seeks a declaratory judgment that federal law grants the agency exclusive authority to regulate event contracts, plus a permanent injunction against state enforcement of laws the agency views as preempted. The release said the New York suit followed similar CFTC lawsuits in Arizona, Connecticut and Illinois.

Four days later, the CFTC announced a separate Wisconsin case. In its April 28, 2026 release, the agency said Wisconsin had sued Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase, and that the CFTC was suing Wisconsin to reaffirm its exclusive jurisdiction over prediction markets.

The agency is also moving through rulemaking. On June 10, 2026, the CFTC published a notice of proposed rulemaking on event contracts involving activities listed in Commodity Exchange Act Section 5c(c)(5)(C), including terrorism, assassination, war, gaming and conduct unlawful under federal or state law. The proposal would create a framework for deciding when those contracts are contrary to the public interest.

Are courts treating Kalshi’s preemption argument consistently?

No. The rulings are split, and each case remains shaped by its procedural posture. In New York, Torres denied preliminary relief to Kalshi. In New Jersey, the Third Circuit affirmed preliminary relief for Kalshi in KalshiEX LLC v. Flaherty, No. 25-1922, decided April 6, 2026.

The Third Circuit held that Kalshi had shown a reasonable chance of success on its argument that the Commodity Exchange Act preempts New Jersey gambling enforcement against sports-related event contracts traded on CFTC-licensed designated contract markets. The divided panel affirmed the district court’s preliminary injunction, leaving New Jersey blocked at that stage from enforcing its gambling laws against those contracts.

That ruling helps Kalshi, but it does not bind the Second Circuit. It also came from an appeal of a preliminary injunction, not a final Supreme Court ruling on the merits. New York’s federal court took a narrower view of preemption at the preliminary stage, and the Second Circuit’s denial of emergency relief leaves Kalshi without the temporary protection it sought there.

Other state disputes are developing in parallel. The Associated Press reported on July 29, 2026, that U.S. District Judge Katherine Menendez temporarily blocked Minnesota’s first-in-the-nation law banning prediction markets before it took effect, after challenges by the CFTC, Kalshi and Polymarket. That order pointed in the opposite direction from New York’s district-court ruling, but it addressed a different state law and a different record.

What happens next in New York?

Kalshi’s New York case now moves forward without the preliminary shield the company sought from the district court and without emergency relief from the Second Circuit. That posture keeps New York’s enforcement leverage intact while the broader preemption dispute continues.

For New York, the ruling strengthens the state’s hand without creating a final judgment that every sports-event contract is illegal gambling in every context. The attorney general has already sued Coinbase and Gemini over prediction-market offerings, and the Gaming Commission has pressed Kalshi through its cease-and-desist process. The refusal to block enforcement keeps pressure on Kalshi’s New York sports markets.

For the industry, the central issue remains unresolved: whether federally regulated event-contract exchanges can offer sports markets nationwide under CFTC oversight, or whether states can apply gambling laws contract by contract and user by user. The next milestones are the continued litigation in Kalshi’s New York case, the CFTC’s state-jurisdiction suits filed in April 2026, and the CFTC’s June 10, 2026 event-contract rulemaking.