Kalshi Denied New York Injunction as Judge Casts Doubt on CFTC Pre-emption Claim

A federal judge in New York has dealt a setback to Kalshi’s argument that its sports-linked contracts sit beyond the reach of state gambling law, denying the exchange’s bid for a preliminary injunction and allowing a state-led legal challenge to proceed. The ruling, issued by Judge Analisa Torres of the Southern District of New York, keeps alive a case that could shape how far federal commodities oversight can shield prediction market operators from state-level regulation.

Legal analyst Daniel Wallach described the decision as a significant loss for Kalshi in what he called the financial capital of the United States. According to Wallach, Judge Torres found that Kalshi had not made a clear showing it was likely to succeed on the merits of its claim that the Commodity Exchange Act pre-empts New York’s gambling statutes as applied to its sports-event contracts.

Court weighs the limits of federal pre-emption

Wallach quoted the order directly: “The Court finds that New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA.” The judge also invoked the long-standing principle that gambling oversight has traditionally sat with individual states, writing that “the scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern.”

Kalshi had leaned on its status as a federally designated contract market to argue that the Commodity Futures Trading Commission holds exclusive jurisdiction over its products, leaving no room for state licensing regimes to intervene. Judge Torres pushed back on that framing, noting, per Wallach’s account, that the CFTC’s exclusive jurisdiction under the CEA “is not without limits.”

The court further held that federal law does not oblige designated contract markets to offer identical products across every state. That finding undercuts one of Kalshi’s central arguments — that state-by-state restrictions would necessarily conflict with federal access rules. Instead, Torres suggested that New York’s licensing requirements could function as an additional obligation rather than a direct contradiction of federal statute.

Case moves to dismissal stage, not resolved

Crucially, the ruling does not end the litigation. It merely denies Kalshi’s request for early relief, meaning the case will now advance to the motion-to-dismiss stage rather than being halted at the outset. Crypto journalist Eleanor Terrett noted that Torres, who previously presided over aspects of the Ripple litigation, has again found herself at the centre of a closely watched digital-asset-adjacent case.

The New York dispute is one strand of a wider regulatory contest over prediction markets. The CFTC has separately sued several states, including New Mexico, seeking to prevent state gaming authorities from applying local rules to contracts it considers federally regulated. Crypto.news reports that the issue has become a recurring flashpoint for regulators and industry participants alike, with CFTC Chairman Michael Selig reportedly suggesting at Consensus Miami that the matter could ultimately require higher judicial resolution.

For Kalshi, the ruling adds pressure at a moment when sports-linked prediction contracts have expanded rapidly across US markets, drawing scrutiny from state gambling regulators wary of ceding authority to federally licensed exchanges. How the motion-to-dismiss phase unfolds will matter beyond New York, given similar jurisdictional disputes are playing out elsewhere in the country.

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