New York Can Restrict Sports Gambling on Prediction Markets, Judge Rules

Prediction Market Ruling – A federal judge denied Kalshi’s request to prevent New York from enforcing its state gambling laws on prediction market sports contracts. Kalshi has since filed a notice to appeal this District Court decision to the US Court of Appeals for the 2nd Circuit.

What Happened

US District Judge Analisa Torres, presiding in the Southern District of New York, yesterday rejected a request from prediction market operator Kalshi to prevent the enforcement of New York’s state gambling laws (Ars Technica). This ruling permits New York to continue enforcing its regulations while the litigation progresses (Ars Technica).

Kalshi, registered as a designated contract market (DCM) with the US Commodity Futures Trading Commission (CFTC), had argued that federal regulation preempted state laws (Ars Technica). However, Judge Torres determined that this CFTC registration does not exempt Kalshi from state gambling laws, contending that Congress did not intend to preempt all state actions related to DCMs (Ars Technica).

Key Details

• Judge Analisa Torres ruled that federal inaction by the CFTC on restricting Kalshi’s sports-event contracts does not block New York gambling laws, stating that state laws regulating gaming “complement rather than conflict with federal law” (Ars Technica).
• Kalshi initiated a lawsuit against New York in October [2025] following a State Gaming Commission order to cease offering sports-related event contracts (Ars Technica). Kalshi views its sports-event contracts as swaps, subject to the CFTC’s exclusive jurisdiction over derivatives (Ars Technica).
• New York officials maintain that residents, particularly those aged 18 to 24, could face harm if Kalshi offers unsupervised sports gambling (Ars Technica). State law also prohibits gambling on sports involving New York-based college teams, according to Ars Technica.
• The CFTC has reportedly taken a more lenient stance on prediction markets compared to some states and has previously sued states to preempt laws regulating such markets (Ars Technica).

Why It Matters

This ruling by Judge Torres implies that states retain authority to regulate gambling activities, even when they involve entities regulated by federal bodies like the CFTC (Ars Technica). Her decision relies on the principle that there is a presumption against federal preemption in areas where states have historically exercised police powers, such as gambling regulation (Ars Technica).

The court found no clear intent from Congress in the Commodity Exchange Act (CEA) to preempt New York’s gambling laws (Ars Technica). This particular case contributes to an ongoing broader legal debate across the US regarding the jurisdictional boundaries between federal and state authorities concerning prediction markets (PYMNTS, DeFi Rate). Conflicting rulings from various circuit appeals courts, such as the 3rd Circuit’s ruling that New Jersey cannot regulate sports bets on prediction markets, and the 6th Circuit’s refusal to grant an injunction against Ohio gambling laws, indicate that the Supreme Court may eventually need to clarify these jurisdictional matters (Ars Technica).

What’s Next

Kalshi has filed a notice to appeal Judge Torres’s decision to the US Court of Appeals for the 2nd Circuit (Ars Technica). This appeal will continue the legal challenge over the extent of state regulatory power versus federal oversight in predicting markets. The ongoing litigation will continue to shape the legal landscape for prediction market operators in regulated markets across the United States.

Originally reported by Ars Technica·Published 8 Jul 2026, 19:14