A federal judge in Manhattan has denied prediction market operator Kalshi’s effort to stop New York from enforcing its gambling laws against the platform’s sports-related offerings. The July 7, 2026 ruling by US District Judge Analisa Torres clears the way for state regulators to proceed with potential enforcement actions while Kalshi continues its broader legal challenge.
KalshiEX LLC operates a federally registered designated contract market overseen by the Commodity Futures Trading Commission (CFTC).
Users trade contracts on the outcomes of events ranging from elections to sports results.
The company maintains that these instruments qualify as swaps or derivatives under the Commodity Exchange Act, placing them under exclusive federal authority and shielding them from state gambling rules.
New York officials, however, view the sports-focused contracts as unlicensed gambling activity subject to state oversight.
Kalshi filed suit in the Southern District of New York last October against officials including Robert Williams, executive director of the New York State Gaming Commission.
The company sought declaratory and injunctive relief, arguing federal law preempts state enforcement.
It also moved for a preliminary injunction to halt any state actions during the litigation.
In her detailed opinion, Judge Torres applied the strict standard required when a party seeks to enjoin government action in the public interest.
She concluded that Kalshi failed to show a clear or substantial likelihood of success on the merits of its preemption claims.
The court recognized a strong presumption against federal preemption in traditional areas of state authority such as gambling regulation.
While assuming for argument’s sake that the contracts qualify as swaps, the judge found no express preemption under the Commodity Exchange Act.
Provisions preserving state authority and allowing the CFTC to consider whether contracts involve gaming under state law further undermined the preemption argument.
Implied field and conflict preemption claims also fell short, as the statute does not occupy the entire field or create an irreconcilable conflict with New York law.
The court further determined that Kalshi had not demonstrated likely irreparable harm.
Many asserted injuries, such as compliance costs or potential business disruption, were characterized as monetary and compensable through damages rather than irreparable.
In contrast, the balance of equities and public interest weighed heavily against an injunction.
Blocking enforcement would prevent New York from protecting residents against risks including gambling addiction—particularly among younger adults—and threats to sports integrity.
As a result, the preliminary injunction was denied.
The New York State Gaming Commission was dismissed from the case on Eleventh Amendment grounds.
Kalshi promptly filed an interlocutory appeal to the Second Circuit.
The decision fits into a patchwork of conflicting rulings nationwide.
Earlier this year, the Third Circuit affirmed a preliminary injunction protecting Kalshi from New Jersey enforcement, finding the contracts likely fall under exclusive federal jurisdiction.
Courts in Ohio and Maryland, however, have denied similar requests.
These varying outcomes underscore the unresolved tension between federal derivatives oversight and state gambling authority.
For Kalshi and the broader prediction market industry, the New York ruling introduces additional operational uncertainty.
Platforms may face pressure to restrict access or offerings in certain states, potentially fragmenting user bases and complicating nationwide growth. The appeal process and ongoing parallel cases will continue to shape whether these event contracts are ultimately treated primarily as financial instruments or as a form of gambling subject to state licensing.