Judge Refuses to Shield Kalshi From New York Gambling Laws

A federal judge has refused to stop New York from enforcing its gambling laws against Kalshi, handing the prediction-market operator a significant loss in the largest legal sports-betting market in the United States. U.S. District Judge Analisa Torres denied the company’s request for a preliminary injunction on July 7, 2026 — an order that would have frozen New York’s enforcement while the lawsuit continues — clearing the way for state regulators to treat its sports-event contracts as unlicensed wagering.

The decision cuts at the heart of Kalshi’s national strategy. Across more than a dozen states, the company has argued that because it runs a federally registered exchange overseen by the Commodity Futures Trading Commission (CFTC), state gambling regulators have no authority over what it lists. In Manhattan, that argument failed.

The dispute began in October 2025, when the New York State Gaming Commission sent Kalshi a cease-and-desist letter accusing it of running an unlicensed sports-wagering operation. Kalshi sued the commission’s officials in federal court within days, seeking an emergency order to keep the state at bay. More than eight months later, the court sided with New York.

The court’s reasoning

“New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the [Commodity Exchange Act],” Torres wrote, concluding the company had not shown it was likely to win its case.

Her starting point has become the industry’s biggest obstacle: regulating gambling is a traditional state power, so courts presume Congress did not erase state law unless it said so clearly. Notably, Torres declined to decide the question that has split other courts — whether Kalshi’s sports contracts even qualify as federally regulated swaps. She assumed they do, and found New York’s laws survive anyway.

On each version of Kalshi’s preemption argument — the claim that federal law overrides the state’s — the judge found a gap. The federal commodities law contains language preserving the authority of other state and federal regulators, which she read as proof Congress never meant to strip out state gambling rules. A special provision lets the CFTC block event contracts tied to “gaming” or to activity that is illegal under state law — further evidence, she wrote, that lawmakers expected state law to keep mattering. And she rejected Kalshi’s argument that following New York’s rules would force it to breach the CFTC’s requirement to give traders equal access, noting nothing stops the company from obtaining a New York license.

Torres also found Kalshi had not shown the kind of irreparable harm an injunction requires; compliance costs and potential penalties, she said, are monetary losses that can be repaid. She dismissed the Gaming Commission itself from the case on constitutional immunity grounds, leaving the suit against its officials intact.

Part of a nationwide fight

The ruling deepens a split that looks increasingly bound for the Supreme Court. Kalshi has won orders shielding it from enforcement in New Jersey — where a federal appeals court backed the company earlier in 2026 — and in Tennessee. It has lost comparable bids in Maryland, Arizona and before the federal appeals court that heard the Ohio case. Torres acknowledged the divide and pointed out that she was not bound by the New Jersey appeals ruling.

Adding to the tangle, the federal government is on Kalshi’s side of the classification fight. The CFTC sued New York in April 2026, asking a court to declare that only Washington can regulate event contracts — one of several suits the agency has filed against states pressing gambling claims. New York, for its part, has been among the most aggressive states: Attorney General Letitia James warned consumers earlier this year that prediction markets operate without gambling safeguards, and that same month she sued Coinbase and Gemini, accusing them of running unlicensed sportsbooks.

Kalshi is fighting on several fronts at once. A Michigan court ordered the company to halt its sports contracts last month, while Kalshi has gone on the offensive elsewhere — suing Ohio’s regulator over a multimillion-dollar fine and joining the fight over Illinois’s new prediction-market tax.

What happens next

Kalshi has already signaled it will appeal to the federal appeals court covering New York, setting up another test of whether its contracts are financial instruments or bets. In a statement, the company said it disagreed with the decision and was weighing its options. For now, New York can move ahead: James’s office is expected to pursue a civil enforcement action in state court, and the underlying lawsuit will continue toward a decision on whether it should be dismissed.

Kalshi is no small target. Sports contracts now drive the bulk of its business, and the platform reported roughly $33 billion in trading volume in June 2026 — a scale that makes access to New York, the country’s biggest legal sports-betting market, commercially significant.

The practical message for the wider industry is that federal registration is not the shield Kalshi has treated it as. Operators counting on a single national rulebook now face the prospect of complying state by state — the very patchwork the company built its legal argument to avoid. New York officials wasted no time celebrating, with Governor Kathy Hochul warning that anyone who gambles with the state’s laws is going to lose.