Judge Rejects Kalshi’s Bid to Block New York Gambling Rules as CFTC Fight Escalates

A federal judge in New York has denied Kalshi’s request for a preliminary injunction, keeping the state’s gambling laws in play against the company’s prediction markets platform. For PSPs and payments firms around high-risk verticals, the point is straightforward: this is another reminder that “federally regulated” does not automatically mean “safe from state enforcement.”

1. U.S. District Judge Analisa Torres rejected Kalshi’s argument that the federal Commodity Exchange Act supersedes New York state gambling laws, according to Reuters. Kalshi appealed the decision the same day it was handed down.
2. The dispute started after New York’s gambling commission ordered Kalshi to stop offering unlicensed sports event contracts. Kalshi then sued the state in October, turning what looked like a licensing dispute into a direct test of how prediction markets are classified.
3. The CFTC entered the fight in April, suing New York after the state tried to apply its gambling laws to CFTC-regulated contract markets. CFTC Chairman Michael S. Selig said New York was “the latest state to ignore federal law and decades of precedent” and added that the agency would not allow state governments to undermine its authority over these markets.
4. New York Gov. Kathy Hochul and Attorney General Letitia James said in a Wednesday statement that the state’s gambling laws are meant to protect consumers and that Kalshi “tried to ignore them.” They also said New York will continue to hold gambling platforms accountable, including prediction markets.
5. The case lands in the middle of a broader regulatory split: the CFTC says real-money prediction markets fall under its jurisdiction, while more states have moved to shut down markets they see as unlicensed or illegal gambling operations. For payment providers, that means exposure can turn on state-by-state enforcement, not just the headline federal regulator.

Kalshi is also not a small-volume edge case. Reuters reported that its platform’s notional volume rose 70% month over month in June to more than $31 billion, with volumes above $1 billion each day since the tournament began. That kind of activity is exactly why regulators, banks, and acquirers keep looking hard at who is actually bearing the legal risk.