Key facts
- Judge Analisa Torres denied Kalshi's request for a preliminary injunction.
- The ruling states that New York state gambling laws apply to Kalshi's sports-event contracts.
- The court found that federal law does not preempt New York's gambling regulations.
- The New York Attorney General's office is expected to pursue civil enforcement against Kalshi.
- The decision represents a significant loss for Kalshi and potentially other prediction market platforms.
Federal Judge Analisa Torres, who previously presided over the SEC v. Ripple lawsuit, has delivered a significant ruling against the prediction market platform Kalshi. In a case concerning New York's gambling laws, Judge Torres denied Kalshi's request for a preliminary injunction, determining that state gambling regulations apply to Kalshi's sports-event contracts and are not superseded by the Commodity Exchange Act.
Kalshi had argued that its contracts qualified as CFTC-regulated swaps and sought to block New York regulators from enforcing gambling laws. However, New York Attorney General Letitia James's office maintains that federal oversight does not preempt state gambling laws. Following the ruling, the Attorney General's office is expected to initiate a civil enforcement action against Kalshi in state court, seeking penalties and injunctive relief.
Legal experts, such as Daniel Wallach, view this as a major setback for Kalshi, potentially influencing other ongoing cases and requiring prediction markets to obtain state licenses or limit operations in New York. Similar challenges are being faced by Kalshi and other platforms like Polymarket in various states, with some judges agreeing that these platforms may have exceeded the original intent of the CFTC framework. Kentucky has also sued Kalshi and Polymarket, alleging illegal sports betting. Kalshi may appeal the decision, but the current legal momentum appears to be against prediction markets, despite support from the CFTC.