New York Shuts Down Kalshi’s Legal Push Now the Second Circuit Must Decide

Key Points

• U.S. District Judge Analisa Torres denied Kalshi’s preliminary injunction, ruling the Commodity Exchange Act does not override New York’s gambling statutes on sports-event contracts
• Governor Kathy Hochul and Attorney General Letitia James both publicly celebrated the ruling, with Hochul stating Kalshi “tried to ignore” New York’s laws and lost.
• Kalshi filed an appeal to the Second Circuit Court of Appeals on the same day the ruling landed, with legal analysts warning of knock-on effects for Coinbase and Gemini cases in Connecticut and elsewhere.

Federal Judge Slams the Door on Kalshi in New York – Platform Appeals Same Day

Kalshi walked into a Manhattan federal courtroom looking for a shield. On Tuesday, it walked out without one.

U.S. District Judge Analisa Torres denied the prediction market platform’s request for a preliminary injunction against New York state gambling enforcement, ruling that the Federal Commodity Exchange Act does not strip the state of its authority to regulate Kalshi’s sports-event contracts. The decision landed with weight. Kalshi filed an appeal to the Second Circuit Court of Appeals the same day the opinion came down.

The core of Kalshi’s argument was federal primacy: the Commodity Futures Trading Commission regulates prediction markets, so states simply cannot touch them. Torres was not persuaded. She found that New York’s interests in addressing gambling addiction, protecting sports integrity, and preventing unregulated contracts from spreading “heavily” outweigh Kalshi’s claims of federal primacy and its concerns about customer access to the platform.

“Kalshi has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits,” she wrote, noting that federal courts remain divided on the issue.

What Torres Actually Said – and Why It Matters?

The legal crux lies in a question courts across America are now wrestling with. Did Congress, when it passed the Commodity Exchange Act, intend for that law to exempt prediction market platforms from state gambling rules? Torres said no. She applied what lawyers call the presumption against preemption: when a state exercises traditional police powers such as regulating gambling, federal law only overrides it when Congress made that intent unmistakably clear.

“Congress did not intend to regulate so broadly as to exclude all state gambling laws from regulating transactions involving swaps,” Torres wrote. She went further, declining to read the CEA’s grant of exclusive CFTC jurisdiction as leaving “no room for supplementary state legislation,” particularly in gambling regulation, which New York has long treated as its own domain.

Critically, Torres also pointed out that other jurisdictions have split on identical motions from Kalshi. Some courts have granted injunctions against state enforcement; others have denied them. That circuit-level inconsistency is precisely what makes the Second Circuit appeal and potentially a Supreme Court hearing so consequential for the whole industry.

Albany Was Not Going to Stay Quiet

Governor Kathy Hochul and Attorney General Letitia James issued a joint statement after the ruling. “New York’s gambling laws are designed to protect consumers. We will continue to hold all gambling platforms accountable to the law, and that includes prediction markets,” they said.

Hochul went further on social media, framing it bluntly: “Gamble with our laws and you’re going to lose. Just ask Kalshi.” The governor had previously banned state employees from using platforms like Kalshi, a signal of how firmly Albany views prediction markets as a consumer protection matter, not a federal derivatives issue. The state’s own legal assault on the sector did not stop with this case: in April, Attorney General James sued Coinbase Financial Markets and Gemini Titan, alleging they were operating as unlicensed sportsbooks through event contracts.

Kalshi Argues the CFTC Has Jurisdiction – and the CFTC Agrees

Kalshi’s position is not without federal backing. CFTC Chairman Brian Quintenz has publicly insisted the agency holds “exclusive” jurisdiction over commodity derivatives markets, prediction markets included. The commission put its argument into action earlier this year, filing suits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin to assert federal oversight.

That is the paradox at the heart of this dispute. Kalshi is a federally licensed Designated Contract Market. It operates under CFTC supervision. Yet states are treating it as an unlicensed sportsbook. The platform’s trading volume surpassed $100 billion on an annualised basis by 2025, including $2.8 billion generated during Super Bowl week alone, according to reporting cited in the source material.

Kalshi is not the only player caught in this crossfire. Platforms like Polymarket also let users wager on outcomes spanning sports to election results. Their influence grew significantly during the 2024 US presidential election, when real-time prediction market probabilities proved more accurate than traditional polling in forecasting Donald Trump’s win over Kamala Harris.

A Legal War Spreading Across States

New York’s ruling is not happening in isolation. A Michigan judge temporarily blocked Kalshi from allowing state residents to participate in sports contracts until 13 July, ruling the platform had a “massive and unfair advantage” over competitors that comply with Michigan’s regulatory structure. Ingham County Circuit Court Judge Rosemarie Aquilina cited particular concern over Kalshi allowing users aged 18 to place wagers when Michigan’s minimum is 21, warning that “the potential irreparable harm on Michigan’s youth would be profound.” The daily fine for non-compliance with geolocation requirements was set at $120,000.

Connecticut is next in line to feel the New York ruling’s weight. Connecticut Attorney General William Tong has already flagged the Torres decision as directly relevant to pending cases involving Kalshi and Coinbase in his state, arguing it should guide the court’s approach. Legal analyst Daniel Wallach described it as a “major loss for Kalshi in the nation’s financial capital, with likely knock-on effects in other cases,” particularly in Connecticut and other suits filed in the Southern District of New York.

The prediction market industry carries centuries of precedent behind it, from papal succession bets in the 1500s to Wall Street election pools in the nineteenth century. Modern platforms arrived at a moment of regulatory unpreparedness, and the legal chaos is the result. Prediction markets themselves became more visible than ever in the 2024 cycle, then immediately drew the attention of state regulators watching billion-dollar volume figures accumulate with no state licensing in place.

Internationally, the picture differs sharply. The European Union regulates prediction markets under its MiCA crypto framework. The United Kingdom permits betting-style markets within its established licensing regime. Most Asian jurisdictions prohibit them outright. The US has no unified answer yet and that is why every state-level ruling carries outsized significance.

Expert Analysis

The Torres ruling does not end Kalshi’s fight. It almost certainly pushes it upward. The Second Circuit will now have to grapple with the same preemption question that has produced contradictory outcomes across multiple courts, and whatever it decides will shape how state after state handles prediction market regulation going forward. If the circuit split deepens, the Supreme Court becomes the only viable endpoint. Kalshi’s same-day appeal signals it understands that clearly the platform is not conceding ground in New York; it is shifting the battlefield.

What the Torres decision does settle, for now, is that the mere fact of federal oversight is not enough. Federally licensed does not mean state-exempt. That principle, if it holds at the appellate level, will force prediction market platforms to engage with state gambling regimes in a way they have so far resisted and may ultimately push them toward seeking state licences, which Torres herself quietly suggested remains an available path.