Kalshi Appeals After Federal Judge Sides With New York in Sports Prediction Market Enforcement Fight

A federal judge has denied Kalshi’s request to prevent New York from enforcing its gambling statutes against the prediction market operator’s sports-event contracts, and the company is already appealing. Southern District of New York Judge Analisa Torres rejected Kalshi’s motion for a preliminary injunction in KalshiEX LLC v. Williams on Tuesday, and Kalshi filed a notice of appeal the same day, moving the case to the U.S. Court of Appeals for the Second Circuit.

The decision is the latest in a wave of state-level legal challenges facing Kalshi and other prediction market operators as they try to establish whether their sports contracts should be treated as federally regulated financial products or as gambling subject to state law.

Judge Rejects Federal Preemption Argument

The dispute centers on whether Kalshi’s sports-event contracts qualify as derivatives under the Commodity Exchange Act, or whether they fall under state gambling law instead. The New York State Gaming Commission argues the contracts violate state statutes, while Kalshi contends its status as a CFTC-regulated exchange should preempt local enforcement. Torres disagreed, writing that New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA, and that Kalshi had not shown a likelihood of success on the merits.

Torres also pointed out that Kalshi retains the option of applying for a New York gaming license rather than continuing to resist enforcement through litigation. Sports and gaming law attorney Daniel Wallach described the ruling as a major setback for Kalshi, predicting it could influence pending litigation in Connecticut and other Southern District of New York cases. New York Attorney General Letitia James is expected to pursue a civil enforcement action against Kalshi in state court seeking restitution, disgorgement, and civil penalties.

Legal Pressure Mounts Across Multiple States

New York is just one of more than a dozen jurisdictions where Kalshi is fighting legal battles over its sports contracts. A Michigan judge issued a temporary restraining order last month barring Kalshi from offering sports-event contracts in that state, and Kalshi has sued Illinois over a new digital-asset transaction charge it says conflicts with CFTC oversight. A Minnesota federal judge separately sided with state officials who argue prediction markets have gone beyond what Congress intended when it created the CFTC’s regulatory framework.

Kentucky’s attorney general has sued Kalshi and Polymarket over allegedly illegal sports betting, while Wisconsin sued Kalshi, Robinhood, Coinbase, Polymarket, and Crypto.com in April on similar grounds. Nevada regulators have pursued their own enforcement actions against the platforms. Meanwhile, the CFTC has taken the opposite stance at the federal level, suing New York in April to assert exclusive jurisdiction over event contracts and backing Kalshi in an Ohio federal appeals court case in May.

With courts across the country reaching inconsistent conclusions on nearly identical legal questions, the Second Circuit appeal could prove pivotal in determining how far states can go in regulating prediction markets that offer sports outcomes. Bettors looking for licensed alternatives can still turn to regulated sportsbooks like DraftKings while the legal fight plays out.