Federal Judge Hands New York Win Over Kalshi, Deepening Prediction Markets Regulatory Battle

A federal judge in Manhattan has ruled that New York can continue enforcing its gambling laws against prediction market platform Kalshi. The decision is a major setback for the company and adds to the growing legal fight over who should regulate prediction markets.

U.S. District Judge Analisa Torres ruled that the federal Commodity Exchange Act does not override New York’s gambling laws for Kalshi’s sports-event contracts. Kalshi has already appealed the ruling.

The Ruling: What the Judge Decided

Judge Torres said Kalshi did not show it was likely to win its case. The company argued that federal law gives the Commodity Futures Trading Commission (CFTC) sole authority over prediction markets, but the judge disagreed.

She also noted that federal courts have reached different conclusions on the issue, making Kalshi’s legal argument less convincing.

Torres ruled that New York’s interest in protecting consumers, reducing gambling harm, and preserving the integrity of sports outweighed Kalshi’s request for emergency relief.

The ruling does not end the lawsuit, but it allows New York to continue enforcing its laws while the case moves forward.

How Kalshi Got Here, and the Federal-State Jurisdiction Fight

Kalshi sued New York after the state’s gaming commission ordered the company to stop offering sports-event contracts without a gambling license.

Prediction market platforms such as Kalshi and Polymarket let users wager on the outcomes of sports, elections, and other events. State regulators argue these products are a form of gambling, while the companies say they are federally regulated financial contracts.

The debate gained attention during the 2024 U.S. presidential election, when prediction markets accurately reflected Donald Trump’s chances of defeating Kamala Harris. Their growing popularity also brought increased scrutiny from state regulators.

The CFTC, led by Chairman Michael Selig, says it has exclusive authority over prediction markets. In April, the agency sued New York after the state filed lawsuits against Coinbase Financial Markets and Gemini Titan, claiming the companies offered unregulated event contracts.

The CFTC has also challenged similar actions in Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island, and Wisconsin. Those lawsuits have created a growing legal battle over whether states or the federal government should regulate prediction markets.

New York Officials Respond

Governor Kathy Hochul and Attorney General Letitia James praised the decision, calling it a win for consumer protection.

In a joint statement, they said New York’s gambling laws are designed to protect residents and that all gambling platforms, including prediction markets, must follow state law.

The ruling also shows New York plans to keep strict control over who can offer wagering products within the state.

What’s Next

Kalshi’s appeal to the Second Circuit Court of Appeals is the next major step. The court’s decision could influence similar cases across the country and may eventually help determine whether the issue reaches the U.S. Supreme Court.

At the same time, the CFTC is working on new rules for prediction markets after launching a rulemaking process in March 2026. Those rules could clarify the federal government’s role and help settle the growing conflict between state and federal regulators.

Until then, prediction markets will remain at the center of one of the biggest legal battles in the U.S. gambling industry.