Kalshi Loses New York Ruling: Federal License 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 July 7, ruling that the Commodity Exchange Act does not preempt New York's gambling enforcement. The decision — Kalshi's own suit, not the CFTC's — 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 July 7, 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 it was offering sports gambling without a New York license. Torres ruled that the Commodity Exchange Act does not preempt New York's gambling enforcement under either field preemption or conflict preemption theory. Kalshi filed notice of appeal to the US Court of Appeals for the Second Circuit the same day.
The ruling adds a third datapoint against the platforms' central legal argument. In Arizona, the CFTC won a preliminary injunction on May 5 based on three distinct preemption theories: field preemption, conflict preemption, and impossibility. Torres rejected all three in New York. She held that the CEA does not occupy the entire regulatory field for event contracts to the exclusion of state law. She rejected conflict preemption on the grounds that Kalshi can simultaneously comply with its CFTC obligations and New York's gambling law — by either obtaining a state gambling license or limiting which contracts it offers to New York residents. And impossibility preemption failed for the same reason: compliance with both regimes is possible, just commercially inconvenient. The CFTC filed its own separate suit against New York in May 2026, which remains pending in a parallel docket.
New York is the largest legal sports-betting market in the United States, generating roughly $2.3 billion in annual handle through the licensed online system overseen by the New York State Gaming Commission. That context shapes how state regulators view an unlicensed federal exchange offering the same sports-outcome contracts: not as a different product, but as unlicensed competition for the same dollar. The Torres ruling means the New York Gaming Commission can now proceed with enforcement against Kalshi and other prediction market platforms without a federal injunction blocking it.
Prediction-market preemption is now active in three federal appellate jurisdictions simultaneously. The Sixth Circuit has the Michigan case, where Polymarket and Robinhood's preliminary injunction was denied in June. The Ninth Circuit has the Arizona case, where the CFTC won its injunction in May and an appeal from Arizona is expected. And now the Second Circuit has the New York case, where Kalshi's own injunction was denied July 7. The three-circuit split makes a Supreme Court resolution increasingly likely. The question is whether any circuit moves fast enough to settle the question before the August 1 Minnesota felony ban goes live or before Congress passes a federal prediction-market bill that would resolve the jurisdiction question by statute.
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Recent updates
Utah Files Felony Charges Against Kalshi and Its Founders — Second State to Criminally Charge a Platform
Utah filed criminal charges against Kalshi and its two co-founders, Tarek Mansour and Luana Lopes Lara, on October 28 — 13 felonies and a misdemeanor, including a second-degree 'pattern of unlawful criminal activity' count and 12 counts of online gambling promotion. The charges stem from a September sting in which an undercover agent placed 12 sports wagers verified to be in Utah. The CFTC sued Utah the day before to block state enforcement, its tenth such suit. Utah is the second state after Arizona to criminally charge Kalshi, and the first to charge the founders personally. Kalshi called it a 'crazy overreach.'
NBA Names Kalshi and Polymarket Preferred Exchanges — Leaving the NFL Alone in Opposition
The NBA announced on October 26 that it has named Kalshi and Polymarket its 'preferred prediction market exchanges,' signed a non-binding memorandum of understanding with the CFTC on basketball integrity, and expanded its DraftKings deal to include prediction markets — the first league to extend a sportsbook partnership into the category. The exchange deals bar league and team personnel from trading NBA contracts, limit permissible markets, and require sharing of suspicious-trading data, in exchange for NBA intellectual property and official data. The NBA joins MLB, the NHL, and MLS as partnered leagues, leaving the NFL as the lone major holdout — and the only league fighting the platforms in court.
CFTC Chair Says Agency Is Watching Prediction Markets for Manipulation Ahead of Midterms
CFTC Chairman Michael Selig said on October 23 that the agency is closely monitoring prediction markets for manipulation ahead of the November 3 midterms, and that it is separately scrutinizing oil market trading tied to President Trump's announcements about the war in Iran. Combined midterm open interest on Kalshi and Polymarket stood at $250 million as of October 18, with Kalshi holding 84%. Selig acknowledged the agency often catches political figures attempting to trade 'oftentimes after the fact.' The remarks highlight the CFTC's dual and somewhat conflicting role as both the platforms' federal protector and their manipulation watchdog, at a time when the agency has shed enforcement staff.