Kalshi Loses New York Ruling: Federal Licence Does Not Override State Gambling Law
US District Judge Analisa Torres of the Southern District of New York denied Kalshi's motion for a preliminary injunction on 7 July, ruling that the Commodity Exchange Act does not preempt New York's gambling enforcement. The decision hands state regulators another win and opens a second federal circuit on prediction market law. Kalshi appealed to the Second Circuit the same day.
US District Judge Analisa Torres of the Southern District of New York denied Kalshi's motion for a preliminary injunction on 7 July 2026, in KalshiEX LLC v. Williams — Kalshi's own suit against New York officials, filed in October 2025 after the state sent a cease-and-desist letter alleging Kalshi was offering sports gambling without a New York licence. Torres ruled that the Commodity Exchange Act does not preempt New York's gambling enforcement. Kalshi filed notice of appeal to the Second Circuit the same day. The CFTC's own separate suit against New York, filed in May 2026, remains pending in a parallel docket.
Torres rejected all three preemption theories that succeeded for the CFTC in Arizona in May. Field preemption failed: the CEA does not occupy the entire regulatory field to exclude state law. Conflict preemption failed: Kalshi can comply with both CFTC obligations and New York's gambling law simultaneously. Impossibility preemption failed for the same reason — compliance with both regimes is commercially inconvenient, not legally impossible. The ruling gives New York's Gaming Commission a clear path to pursue enforcement without a federal injunction in the way.
For UK readers, the New York context is relevant because the New York State Gaming Commission operates a licensing regime for sports betting broadly analogous to the UK Gambling Commission's. The Torres ruling shows that a federal derivatives licence does not by itself displace the need for a state gambling licence — a principle that maps directly onto UK regulation, where the FCA and the Gambling Commission operate as separate gatekeepers. Neither Kalshi nor Polymarket holds a Gambling Commission licence, which is why both remain inaccessible to UK customers.
Prediction-market preemption is now active in three federal appellate circuits: the Sixth (Michigan, PI denied June 2026), the Ninth (Arizona, PI granted May 2026), and now the Second (New York, PI denied July 2026). The split between Arizona and the growing body of contrary rulings makes a Supreme Court referral increasingly likely. The question is whether Congress or the courts resolve it first, and whether any ruling arrives before the Minnesota felony ban's August 1 effective date.
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