Kalshi Seeks Relief From Enforcement to Keep Trading in New York During Appeal
Commentary by Stephan Ariyan
Kalshi has asked a federal district court to pause New York's enforcement of its gambling laws against the prediction market's event contracts while it appeals an adverse ruling.
A federal judge in New York last week handed a defeat to Kalshi, ruling that the CEA does not preempt New York's gambling laws. Kalshi, which has been fighting state gaming regulators across the country, immediately appealed.
The dispute began in October 2025, when the New York State Gaming Commission sent Kalshi a cease-and-desist letter demanding it stop offering sports-event contracts in New York without a state gaming license. Kalshi sued, arguing that the CEA gives the CFTC exclusive jurisdiction over trading on federally designated contract markets and preempts state gambling laws. On July 7-8, 2026, Judge Analisa Torres disagreed, finding that Kalshi could simply apply for a New York license.
Kalshi filed a notice of appeal the same day of the ruling and on July 15 asked the judge to enjoin enforcement while the case is before the Second Circuit. If the district court does not act, Kalshi says it will seek the same relief from the Second Circuit on July 23. In the meantime, New York has agreed not to bring an enforcement action through July 30.
Kalshi argues it faces an impossible choice: complying with New York would require it to violate a CFTC order issued July 14 directing Kalshi to fulfill open trades, since in the CFTC's own words, state courts cannot order the unwinding of swap transactions subject to federal exclusive jurisdiction. The CFTC and the DOJ have both sided with Kalshi on the underlying legal question, with the DOJ suing New York and at least six other states on the same preemption theory.
The case is part of a widening circuit split. The Third Circuit has already ruled in Kalshi's favor, and district courts in Tennessee and Arizona have granted similar injunctions, while courts in Maryland and now New York have ruled the other way. The Second Circuit's decision will either resolve that split or set the stage for a Supreme Court fight.
Commentary
The wave of litigation over event contracts is a symptom of a larger problem. The CFTC asserts that Congress has decided where prediction markets fit in the U.S. regulatory framework, but most of the states disagree that any such decision has been made. As states, the CFTC, and market operators battle over jurisdiction, courts are being asked to answer policy questions that belong in the legislative arena.
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