GoKawiilKalshi lost an attempt to override New York’s state gambling laws yesterday, with a federal judge rejecting the prediction market operator’s request to prevent enforcement of the rules.
Kalshi is appealing the decision to a higher court. This is one of numerous cases in which judges must decide whether state laws are preempted by federal regulation of prediction markets.
New York Governor Kathy Hochul and Attorney General Letitia James issued a joint statement on the ruling today. “New York’s gambling laws are designed to protect consumers,” they said. “Kalshi tried to ignore them. Yesterday, they lost in court. We will continue to hold all gambling platforms accountable to the law—and that includes prediction markets.”
The ruling against Kalshi was issued by US District Judge Analisa Torres in the Southern District of New York. Shortly after the ruling, Kalshi filed a notice stating that it is appealing the decision to the US Court of Appeals for the 2nd Circuit.
Kalshi is registered with the US Commodity Futures Trading Commission (CFTC) as a designated contract market (DCM). Torres found that this does not exempt Kalshi from state gambling laws.
“Congress did not intend to preempt all state actions that may relate to DCMs,” Torres wrote. “Instead, the CEA [Commodity Exchange Act] leaves room for states to regulate tangential issues that may arise from trading swaps and other financial products on DCMs.”
Judge: US inaction doesn’t block states
While the CFTC has not exercised its own authority to restrict Kalshi’s sports-event contracts, Torres wrote that the federal agency’s inaction does not block New York gambling laws. New York laws regulating gaming “complement rather than conflict with federal law,” she wrote.
The CFTC has taken a more lenient approach to prediction markets than states and sued states to preempt laws that prohibit or regulate the markets. Kalshi and its rival Polymarket both have Donald Trump Jr. as an advisor, and a Trump Jr.-backed venture capital firm invested in Polymarket.