Kalshi, a US-regulated prediction market, has suffered a major legal defeat in New York after U.S. District Judge Analisa Torres, the same judge who presided over the closely watched SEC v. Ripple Labs case, denied the prediction market operator’s request for a preliminary injunction against the New York State Gaming Commission.
The ruling, filed on July 7 in KalshiEX LLC v. Williams (Case No. 1:25-cv-08846), clears the way for the case to proceed to the motion-to-dismiss stage. The development was first flagged by sports gaming attorney Daniel Wallach and journalist Eleanor Terrett, who described it as a “major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects on other cases, especially Connecticut and other SDNY lawsuits.”
Court Rejects Kalshi’s Federal Preemption Argument
At the heart of the case is Kalshi’s long-running argument that its sports-event contracts fall exclusively under the jurisdiction of the Commodity Futures Trading Commission (CFTC) as swaps traded on a designated contract market (DCM), and are therefore shielded from state gambling regulation under the Commodity Exchange Act (CEA).
Judge Torres was unpersuaded. In her 22-page opinion, she wrote that “New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA,” and concluded that the company failed to make “a clear or substantial showing that it is likely to succeed on the merits.”
The court applied the presumption against preemption, noting that “the scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern.” Judge Torres held that Kalshi could not satisfy any of the three preemption theories it advanced.
On express preemption, the court assumed without deciding that Kalshi’s sports contracts may qualify as swaps but found that Congress did not intend to displace state gambling laws.
On field preemption, the ruling cited the CEA’s own savings clause and the so-called Special Rule in 7 U.S.C. § 7a-2(c), which allows the CFTC to prohibit event contracts tied to “gaming” and “activity that is unlawful under any Federal or State law.” According to the court, this provision “severely undercuts Kalshi’s suggestion that Congress intended to displace all state laws.”
On conflict preemption, Judge Torres rejected Kalshi’s claim that complying with New York law would violate the CFTC’s impartial access requirements for DCMs, writing that “there is nothing preventing Kalshi from obtaining a license pursuant to New York law.”
All Four Winter Factors Weigh Against Kalshi
The court also found that Kalshi failed on the remaining preliminary injunction factors set out in Winter v. Natural Resources Defense Council. On irreparable harm, the judge held that Kalshi’s alleged injuries were “largely monetary” and that the cost of geolocating users state-by-state was an “ordinary burden” of complying with government regulation.
On the balance of the equities and public interest, the ruling sided firmly with New York, citing risks to individuals between the ages of 18 and 24 who are considered a “high-risk population for gambling addictions,” concerns over the integrity of college sports, and the state’s sovereign interest in enforcing statutes enacted by its representatives.
Separately, the court dismissed the New York State Gaming Commission itself from the docket on Eleventh Amendment immunity grounds, though the case continues against the commission’s individual members in their official capacities, including Chair Brian O’Dwyer and Executive Director Robert Williams.
A Blow to Kalshi’s Momentum in a Fractured Legal Landscape
The New York ruling arrives at a delicate moment for Kalshi, which is reportedly seeking a $40 billion valuation in a new funding round and recently approached $10 billion in monthly trading volume, with sports contracts accounting for the bulk of activity.
The decision deepens an already fractured national legal landscape. Kalshi has won preliminary injunctions in New Jersey, where the Third Circuit affirmed the injunction in April, and in Tennessee. It has lost in Maryland, Nevada, Arizona, and the Sixth Circuit, and is currently suing Illinois over a new state law targeting prediction markets. The CFTC has continued to back Kalshi’s position in amicus filings and by suing several states directly.
Judge Torres explicitly acknowledged this split, citing rulings from both sides of the debate, and noted that her court was not bound by the Third Circuit’s contrary conclusion.
Kalshi has not yet publicly commented on the ruling or indicated whether it intends to appeal to the Second Circuit. Given the stakes for the New York market and the growing likelihood of a circuit split reaching the Supreme Court, an appeal appears probable.
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