A federal judge in Manhattan has ruled that New York can enforce its gambling laws against Kalshi, a prediction market operator registered with the Commodity Futures Trading Commission, despite the company's claim that federal derivatives oversight bars state enforcement. U.S. District Judge Analisa Torres denied Kalshi's preliminary injunction on July 7, 2026, finding that the Commodity Exchange Act does not preempt New York gambling law under express, field, or conflict preemption. Kalshi immediately appealed to the U.S. Court of Appeals for the Second Circuit; New York officials said the ruling confirms state authority over prediction markets.
Federal Preemption Rejected
Judge Torres assessed express, field, and conflict preemption and concluded none applied. She found no CEA language explicitly removing state authority over gambling tied to federally registered contracts. As to field preemption, she relied on a savings clause and the Dodd-Frank Special Rule, Section 40.11, which lets the CFTC block event contracts involving gaming or unlawful activity; Torres said that provision would be unnecessary if Congress had already occupied the entire field. On conflict preemption, she saw no impossibility because Kalshi could apply for a state gambling license under New York law. Ars Technica reported that Torres said the federal statute does not sweep away state actions connected to designated contract markets and that the CEA preserves state authority over tangential matters.
Licensing and Geolocation Defense Rejected
Kalshi argued that its geolocation filtering and CFTC registration exempted it from New York licensing rules. Torres rejected those arguments, according to TechTimes. She wrote in her ruling that Kalshi faces no barrier to obtaining a New York gambling license and pointed to the state's historical use of its police power to regulate gambling. She also dismissed the New York State Gaming Commission itself on constitutional immunity grounds, leaving only the individual commissioners as defendants; that procedural point did not alter the substantive preemption holding.
CFTC Inaction Does Not Extinguish State Power
Kalshi self-certified sports-event contracts with the CFTC in January 2025. In that process, a designated contract market notifies the CFTC that a new product meets public-interest standards, and the agency may block contracts tied to gaming or unlawful activity. The CFTC did not act. Kalshi treated that inaction as exclusive federal approval, but Torres rejected that reading. Courthouse News reported that she cited a savings clause in Section 2 of the CEA showing Congress left room for state gambling enforcement over transactions involving swaps. She described New York's gaming rules as complementing rather than conflicting with federal law.
Appeal and State Officials Respond
After the ruling, Kalshi filed a notice of appeal to the Second Circuit the same day. A Kalshi spokesperson told TechTimes that the company disagrees with the decision and is evaluating its legal options. New York Governor Kathy Hochul and Attorney General Letitia James issued a joint statement asserting that state gambling laws protect consumers and that Kalshi tried to ignore them; they said the state would continue to hold all gambling platforms accountable, including prediction markets. Hochul also posted on social media a warning that gambling with New York's laws results in losing, according to Courthouse News.
Wider National Conflict
The case is one of many across the country. Attorney Daniel Wallach told TechTimes that the controversy has been playing out nationwide, with roughly 30 or 40 lawsuits pending. Law professor Marc Edelman said it was odd to see a Republican administration trying to take oversight of an industry historically regulated by states. The CFTC has sued nine states, including New York, asserting exclusive jurisdiction over prediction market contracts. Kalshi and Polymarket both list Donald Trump Jr. as an adviser, and a Trump Jr.-backed venture capital firm invested in Polymarket. Kalshi said it handled more than $1 billion in Super Bowl trading volume, according to Courthouse News. The Second Circuit appeal is the next pending step, and a Supreme Court resolution could arrive before the end of the year, TechTimes reported.
