Kalshi’s New York Appeal Remains a Preemption Fight After Second Court Denial

Meta description: Kalshi’s New York case turns on federal preemption after SDNY denied relief and the CFTC intervened separately in Michigan.

Tags: Kalshi, CFTC, New York Gaming Commission, Letitia James, Michael Selig, Event Contracts

market_platform: Kalshi

category: Regulation

Kalshi’s New York case is still a federal preemption fight, not a completed federal shield against state gambling enforcement. The core record now includes a July 7 Southern District of New York ruling denying Kalshi’s preliminary injunction, a July 8 Second Circuit appeal, a July 13 corrected district-court order, a July 27 denial of emergency relief pending appeal, and a separate July 14 CFTC emergency order involving Michigan trades.

What is Kalshi fighting in New York?

The dispute is whether New York can apply its gambling laws to sports-related event contracts listed by KalshiEX LLC, a Commodity Futures Trading Commission-registered designated contract market. Kalshi argues that the contracts are federally regulated derivatives under the Commodity Exchange Act. New York argues that federal registration does not prevent state gambling regulators from enforcing state law against sports-linked products offered to New York users.

The case, KalshiEX LLC v. Williams, No. 1:25-cv-08846, began after the New York State Gaming Commission directed Kalshi to stop offering what the commission described as an unlicensed mobile sports wagering platform in connection with sports events. In her July 7 opinion and order, U.S. District Judge Analisa Torres said Kalshi sought to stop the commission and its officials from enforcing New York gambling law against sports-related event contracts while the case continued.

Torres denied Kalshi’s request for a temporary restraining order and preliminary injunction. The court concluded that Kalshi had not shown a likelihood of success on its preemption argument and had not established irreparable harm sufficient to justify preliminary relief. A July 13 order corrected a scrivener’s error in the opinion, clarifying that the CFTC, not the New York Gaming Commission, holds the authority referenced in 7 U.S.C. § 7a-2(c)(5)(C)(i) to determine whether certain event contracts are contrary to the public interest.

What did New York say after the July ruling?

New York Attorney General Letitia James and Governor Kathy Hochul framed the July 7 ruling as a victory for state gambling enforcement. In a July 8 statement, their offices said Kalshi had lost in court and that New York would continue applying gambling laws to prediction markets and other gambling platforms.

That statement matters because it describes how New York views the dispute: as a gambling-law and consumer-protection case, not only as a fight over exchange regulation. The state’s position is that Kalshi’s CFTC registration does not automatically override New York’s authority to regulate sports wagering activity within the state.

For Kalshi, the case is about more than one enforcement letter. The company’s argument is that CFTC-regulated event contracts cannot be blocked by state gambling regulators merely because the event resembles sports betting or another wagering category. A ruling for Kalshi in the Second Circuit would strengthen the industry’s preemption argument. A ruling for New York would support state regulators that want to treat some event contracts as gambling products under state law.

What has happened on appeal?

Kalshi appealed the July 7 order to the U.S. Court of Appeals for the Second Circuit. The Second Circuit docket in KalshiEX LLC v. Williams, No. 26-1835, shows the interlocutory civil appeal was opened on July 8. The docket lists KalshiEX LLC as appellant and Robert Williams, Brian O’Dwyer, John A. Crotty, Sylvia B. Hamer, Martin J. Mack, Peter J. Moschetti Jr., Marissa Shorenstein, Jerry Skurnik, and the New York State Gaming Commission as appellees.

The appeal did not immediately freeze New York’s enforcement position. On July 27, Torres denied Kalshi’s request for an injunction pending appeal and also denied administrative relief. That order left the July 7 denial in place while the Second Circuit case proceeds. It did not decide the full appeal or end Kalshi’s underlying lawsuit.

The distinction is important. The Second Circuit appeal gives Kalshi another chance to press its preemption argument, but the district court’s July 27 order means Kalshi did not obtain interim protection from New York enforcement at that stage. The next binding appellate development will come from the Second Circuit, either on emergency relief or on the merits of the interlocutory appeal.

What did the CFTC do in Michigan?

The CFTC’s clearest July intervention involving Kalshi came in Michigan, not New York. In Release No. 9267-26, dated July 14, the agency said it stayed a KalshiEX emergency rule change proposed in response to a Michigan state court order directing the company to cancel certain previously executed trades involving Michigan residents. The CFTC also ordered KalshiEX to fulfill open trades according to its normal practices.

CFTC Chair Michael Selig said in the July 14 release that a state cannot force a designated contract market to violate its obligations under the Commodity Exchange Act and CFTC regulations. The agency’s position was that canceling already executed derivatives trades could damage certainty in federally regulated trading and clearing.

The Michigan order is relevant to New York because it shows the CFTC’s view of state action that interferes with a registered derivatives market. But it was not a blanket order resolving Kalshi’s New York case. It addressed a specific conflict over Michigan trades and Kalshi’s proposed emergency rule for handling them.

Why does Michigan matter if New York is a separate case?

Michigan gives Kalshi and the CFTC a concrete example of federal intervention when a state court order affected already executed trades. New York presents a broader question: whether state gambling law can be enforced against sports-related event contracts before the settlement issue even arises.

The July 14 CFTC release also shows the scale of the agency’s federal-jurisdiction campaign. The commission said it had filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, and had filed amicus briefs in the Sixth Circuit, Ninth Circuit, and the Supreme Judicial Court of Massachusetts. That named list supports the view that Kalshi’s New York case is part of a wider state-versus-federal contest over prediction markets.

Torres’ July 7 opinion also cited nationwide litigation involving Kalshi, including rulings that had gone both for and against the company in other jurisdictions. The New York ruling therefore adds to a divided legal landscape rather than settling the national preemption question.

What is the core legal question?

The core question is whether the Commodity Exchange Act preempts state gambling laws as applied to event contracts listed by a CFTC-registered exchange. Kalshi’s position is that CFTC-regulated designated contract markets should not be subject to state gambling enforcement for exchange-listed contracts. New York’s position is that the Commodity Exchange Act does not automatically displace state gambling laws when the products are tied to sports events offered in New York.

The July 7 SDNY order favored New York at the preliminary-injunction stage. The July 27 order kept that result in place pending appeal. Neither order is a final nationwide ruling on prediction markets, and neither prevents the Second Circuit from reaching a different conclusion on appeal.

For the industry, the stakes are operational and legal. If state regulators can enforce gambling laws against CFTC-registered event-contract exchanges, platforms may face different state restrictions for sports-related markets. If Kalshi and the CFTC prevail on preemption, state regulators would have less room to treat those contracts as ordinary gambling products.

What happens next?

The next milestone is action in the Second Circuit appeal, KalshiEX LLC v. Williams, No. 26-1835. The appeal was opened on July 8, and the district court denied Kalshi’s request for emergency protection pending appeal on July 27. Until the Second Circuit acts, the New York case remains a live test of how far state gambling law can reach into CFTC-regulated event contracts.

The CFTC’s July 14 Michigan order shows that the federal regulator is willing to use emergency authority when it sees state action as interfering with federally regulated trading. The New York dispute still depends on the courts deciding whether federal commodities law displaces New York gambling enforcement for the sports-related contracts Kalshi offers to users in the state.