Prediction market platform Kalshi has suffered a legal loss in New York. According to a court filing on the 7th of July, the firm was denied a preliminary injunction by Judge Analisa Torres of the Southern District of New York.
Judge Torres maintained that gambling falls under the purview of local state oversight.
The scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern.
Additionally, Judge Torres clarified that federal law, the Commodity Exchange Act, does not preempt state gambling laws.
Courts apply a presumption against preemption with respect to areas where states have historically exercised their police powers.
She explained that such a presumption arises only when Congress legislates in a field traditionally governed by the states. In other words, federal authority applies only where Congress has explicitly displaced state control. The case was set to determine whether prediction markets are regulated financial products or unlicensed gambling operations.
Kalshi had initially argued that it was above state gambling laws because it was a CFTC-regulated platform, with federal oversight preempting state authority. In fact, in April 2026, the CFTC backed the Kalshi case, citing federal preemption of state laws.
The agency had made similar arguments against Arizona, Connecticut, Illinois, Wisconsin, New Mexico, and Minnesota. But the CFTC’s attempt to block other states’ push to police prediction markets could be derailed.
Impact of court ruling against Kalshi
Commenting on the update, sports betting and gaming lawyer Daniel Wallach said Judge Torres’ ruling would have a far-reaching domino effect. First, the CFTC will likely lose its case against New York State Attorney General (NYAG).
Other state cases against prediction market providers like Gemini and Coinbase would advance, including NYAG filing enforcement action against Kalshi for gambling law violations.
And the crackdown isn’t stopping in New York. Kalshi’s push for an injunction in Connecticut will also be quashed. In other words, CFTC’s push for sole oversight over the prediction markets will stall.
Wallach concluded that the ruling is a ‘major loss’ to Kalshi and a ‘big win’ for NYAG, noting the prediction markets firm will likely appeal it.
Major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects in other cases. Kalshi will appeal the injunction denial to CA2 and seek an immediate injunction pending appeal.
In June, Kalshi and Polymarket volumes hit a record monthly high of $43 billion as the World Cup kicked off.
In fact, sports betting dominates the volume, further reinforcing the argument that the platforms are ‘100% gambling sites,’ not risk management tools.
Final Summary
- A New York court denied Kalshi’s injunction and ruled that federal law does not preempt state gambling laws.
- An analyst said the ruling is a ‘major loss’ to Kalshi and CFTC, warning of likely domino effects on pending prediction market cases.
