Kalshi sports prediction markets hit by loss in New York injunction bid

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Kalshi loses New York bid

Highlights

Kalshi lost its bid for a preliminary injunction in New York.
The case can now proceed to the motion-to-dismiss stage.
The court found New York gambling laws are not preempted by the Commodity Exchange Act at this stage.

Judge Analisa Torres of the Southern District of New York denied Kalshi’s request for a preliminary injunction, allowing the case to move toward the motion-to-dismiss stage, according to Crypto.News. The order does not end the dispute, but it weakens Kalshi’s attempt to stop New York’s enforcement push at the earliest stage.

State gambling powers survive early test

The case centers on Kalshi’s sports-event contracts, which let users trade on the outcome of sporting events. Kalshi argued that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over its federally regulated markets, leaving no room for New York gambling rules.

Judge Torres rejected that argument for now. The court found that New York’s gambling laws, as applied to Kalshi’s sports contracts, are not preempted by the CEA. It also found that Kalshi had not clearly shown it was likely to win on the merits, a key requirement for early court relief.

The decision gives New York more room to argue that sports prediction contracts fall within its long-standing authority over gambling and lotteries. It also complicates Kalshi’s effort to frame the dispute mainly as a federal commodities-law issue.

CFTC reach comes under scrutiny

The ruling is not a final judgment on whether Kalshi’s products are lawful in New York. Still, it challenges one of the company’s core legal claims: that CFTC oversight alone should shield its contracts from state-by-state restrictions.

According to the report, the court said the CFTC’s exclusive jurisdiction under the CEA has limits. It also rejected, at this stage, Kalshi’s argument that federal law requires designated contract markets to offer identical contracts nationwide. That matters because Kalshi has warned that state licensing rules could create a patchwork system for a federally regulated exchange.

A broader test for prediction markets

The New York decision lands as regulators, courts, and lawmakers debate where prediction markets fit in U.S. financial law. The CFTC has sued several states, including New Mexico, to stop state gaming rules from applying to federally regulated contracts, while gaming groups have pushed Congress to keep sports and casino-style prediction markets outside CFTC oversight.

For Kalshi, the stakes are immediate. Sports-related contracts have become a major driver of activity, and losing access to large states would undercut growth in one of its busiest categories. For regulators, the case may help decide whether sports prediction markets are treated as financial instruments, gambling products, or something that requires a new legal framework.

We also reported Kalshi prepares for IPO amid revenue growth.

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