Kalshi is asking the Second Circuit to revive its bid to block New York gambling enforcement after U.S. District Judge Analisa Torres denied a preliminary injunction on July 7, 2026, in KalshiEX LLC v. Williams, No. 1:25-cv-08846. The ruling rejected Kalshi’s argument that the Commodity Exchange Act preempts New York gambling law as applied to sports-event contracts.
What did the New York court decide?
Torres denied Kalshi’s request for a temporary restraining order and preliminary injunction against New York State Gaming Commission officials, leaving state enforcement authority in place while the case continues. In the July 7 opinion and order, later corrected on July 13 to fix a scrivener’s error, the Southern District of New York held that Kalshi had not made the showing required for preliminary relief.
The order turned on the four familiar injunction factors: likelihood of success on the merits, irreparable harm, the balance of equities and the public interest. Torres found that each weighed against Kalshi at this stage. The court also dismissed the New York State Gaming Commission itself from the case on Eleventh Amendment immunity grounds, while allowing the claims against individual commission officials in their official capacities to proceed for purposes of the injunction analysis.
Kalshi’s central theory is that its sports-event contracts are federally regulated swaps traded on a Commodity Futures Trading Commission-designated contract market, which gives the CFTC exclusive jurisdiction and displaces state gambling law. Torres rejected that argument at the preliminary-injunction stage. The opinion said gambling regulation has historically been a state police-power function, which meant Kalshi had to show that Congress clearly intended the Commodity Exchange Act to override New York’s authority.
Torres concluded Kalshi had not made that showing. The court wrote that Congress did not intend to preempt all state actions that may relate to designated contract markets and that the Commodity Exchange Act leaves room for states to regulate issues that arise alongside trading on those markets. Reuters, The Block and Ars Technica each reported the July 7 denial on July 8, citing the court’s conclusion that New York’s gambling laws were not preempted as applied to Kalshi’s sports-event contracts.
How did Kalshi get into the New York case?
The New York State Gaming Commission ordered Kalshi in October 2025 to stop offering, advertising and administering what the state described as an unlicensed mobile sports wagering platform connected to sports events in New York. Kalshi sued commission officials in the Southern District of New York, arguing that New York was interfering with federally regulated derivatives trading.
The complaint put New York into the same legal fight already playing out in several states: whether event contracts listed on a CFTC-regulated exchange are financial products shielded from state gambling rules, or whether state regulators may treat sports-event contracts as sports betting when offered to residents within their borders.
Kalshi entered that fight with meaningful support from the federal derivatives regulator. The CFTC filed an amicus brief in KalshiEX LLC v. Schuler, No. 26-3196, in the U.S. Court of Appeals for the Sixth Circuit on May 12, 2026, saying the Commodity Exchange Act gives the agency exclusive jurisdiction over prediction markets. The CFTC described state enforcement actions as an encroachment on the federal regulatory structure Congress assigned to the commission.
That federal position did not carry the day in New York district court. Torres distinguished between the CFTC’s authority to regulate designated contract markets and a separate question: whether that federal authority bars New York from enforcing gambling laws against sports-event contracts offered within the state. For Kalshi, the practical problem is that the company needs more than CFTC registration to stop state enforcement. It needs appellate courts to agree that state gambling law is preempted.
Why does the Second Circuit matter?
Kalshi appealed the July 7 order to the U.S. Court of Appeals for the Second Circuit on July 8, according to the Second Circuit docket in KalshiEX LLC v. Williams, No. 26-1835. The appeal gives the New York dispute a faster path to a circuit-level answer on the same preemption question that has divided other courts.
The split is already visible. In KalshiEX LLC v. Flaherty, the Third Circuit affirmed an injunction blocking New Jersey from enforcing state gambling law against Kalshi’s sports-related event contracts. The April 6, 2026, opinion held that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps traded on designated contract markets and that field and conflict preemption barred New Jersey enforcement as applied to those contracts.
The Sixth Circuit took a different posture in KalshiEX LLC v. Schuler. On April 24, 2026, a Sixth Circuit panel denied Kalshi’s motion for an injunction pending appeal against Ohio officials, while ordering the appeal expedited. The court’s docket identifies Judges Alice M. Batchelder, Eric E. Murphy and Kevin G. Ritz on that order. The Sixth Circuit did not issue a full merits opinion in that emergency ruling, but the denial gave state regulators another citation against Kalshi’s request for immediate relief.
Torres’s New York opinion cited the broader body of nationwide litigation, including decisions that granted Kalshi relief and decisions that denied it. That posture makes the Second Circuit important because a ruling against Kalshi would deepen the conflict with the Third Circuit. A ruling for Kalshi would strengthen the exchange’s argument that states cannot use gambling law to police sports-event contracts listed on a federally regulated market.
What is the statutory fight about?
The legal fight centers on how courts read the Commodity Exchange Act after Congress expanded federal derivatives regulation and gave the CFTC authority over designated contract markets. Kalshi argues that sports-event contracts listed on its exchange fall within that federal framework and therefore cannot be shut down by state gambling regulators.
New York’s position, accepted by Torres at the preliminary-injunction stage, is narrower. The state argues that its gambling laws do not regulate futures markets as such. Instead, it says Kalshi is offering sports wagers to New York customers without the license required for mobile sports wagering. Torres credited the state’s interest in regulating gambling, preventing addiction, preserving sports integrity and enforcing statutes adopted by New York lawmakers.
The July 7 opinion also rejected Kalshi’s irreparable-harm argument. Kalshi argued that state-by-state compliance would impose heavy burdens and create conflicts with its federal obligations. Torres found that ordinary costs of regulatory compliance generally do not constitute irreparable harm and noted that Kalshi had been denied injunctive relief in some other jurisdictions without losing its CFTC designation.
The court did not enter final judgment on the merits of the lawsuit. A preliminary-injunction decision asks whether a party has made the showing needed for immediate relief before the full case is resolved. That distinction matters, but it does not make the ruling minor. Without an injunction, New York officials are not blocked by the district court from enforcing state gambling law while Kalshi pursues its appeal.
What are the industry stakes?
The New York appeal is now one of the clearest tests of the prediction-market industry’s preferred regulatory model: one federal license, supervised by the CFTC, rather than a state-by-state gambling compliance regime. For sports-event contracts, that model is under pressure from regulators who see little practical difference between an exchange-listed contract on a game outcome and a bet placed through a licensed sportsbook.
Kalshi’s advantage is that the CFTC has publicly defended federal authority over prediction markets, including through its May 2026 Sixth Circuit amicus brief. Its disadvantage is that state regulators are not waiting for a single national answer. New York, Ohio, New Jersey and other jurisdictions have pushed the preemption issue into different courts, producing rulings that do not yet line up cleanly.
New York also carries commercial and legal significance beyond its population. It is a major sports-betting state, a major financial center and a venue where a Second Circuit ruling can influence courts and regulators across the Northeast. A decision endorsing Torres’s reasoning would give state gaming agencies more room to challenge sports-event contracts even when listed on a CFTC-regulated exchange. A decision rejecting it would put more weight behind Kalshi’s argument that the Commodity Exchange Act leaves no room for state gambling enforcement against those contracts.
The next concrete milestone is the Second Circuit’s handling of Kalshi’s appeal in No. 26-1835. The appellate docket was opened July 8, 2026. The court has not issued a final merits decision in the New York appeal.
