Kalshi Appeals to Second Circuit After Federal Judge Sides With New York in Sports Prediction Market Fight

A federal judge has denied Kalshi’s request to prevent New York from enforcing its gambling statutes against the prediction market operator, and the company moved quickly to appeal. 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, sending the case to the U.S. Court of Appeals for the Second Circuit.

The ruling adds another chapter to a legal battle that now spans more than a dozen states, with New York sports betting operators watching closely to see whether prediction markets will ultimately need to be licensed like traditional sports betting operators.

New York Gambling Law Wins Out Over Federal Preemption Claim

At the center of the case is whether Kalshi’s sports-event contracts qualify as federally regulated derivatives under the Commodity Exchange Act or fall instead under state gambling law. The New York State Gaming Commission argues the contracts violate state statutes, while Kalshi maintains its CFTC-regulated exchange status preempts local enforcement. Torres sided with the state, writing that New York’s gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA, and that Kalshi had not made a clear or substantial showing it was likely to succeed on the merits.

The judge noted that Kalshi still has the option of applying for a New York gaming license rather than fighting enforcement in court. Sports and gaming law attorney Daniel Wallach called the ruling a major loss for Kalshi in the country’s financial capital, predicting knock-on effects for the company’s other pending disputes, particularly in Connecticut and other Southern District of New York cases.

Kalshi Faces a Growing List of State Challenges

New York is only one front in Kalshi’s legal fight. Last month, a Michigan judge issued a temporary restraining order barring Kalshi from offering sports-event contracts in that state. Kalshi has also sued Illinois over a new law imposing a charge on digital-asset transactions, arguing it conflicts with CFTC oversight, while a Minnesota federal judge sided with officials who argue prediction markets have exceeded the scope Congress intended when it created the CFTC’s regulatory framework in 1974.

Kentucky’s attorney general has sued both Kalshi and Polymarket over alleged illegal sports betting, and Wisconsin filed a similar suit in April against Kalshi, Robinhood, Coinbase, Polymarket, and Crypto.com. Nevada regulators have pursued comparable actions of their own. The CFTC has staked out the opposite position, suing New York in April to assert exclusive federal authority over event contracts and backing Kalshi before an Ohio federal appeals court in May.

For bettors and sportsbooks alike, the patchwork of conflicting rulings across states means the legal status of sports-related prediction markets remains unsettled heading into a Second Circuit review that could shape how the fight plays out nationwide. Bettors looking for regulated alternatives can still find licensed exchanges like Sporttrade operating under clear state oversight.