Judge Rejects Kalshi Bid to Block NY Sports Contract Oversight

A federal judge rejected Kalshi's request to block New York from regulating its sports prediction contracts, ruling that the state's gambling laws apply to the platform's offerings. The decision means Kalshi must treat its sports event contracts as gambling under New York law, not as futures regulated by the Commodity Futures Trading Commission.

U.S. District Judge Loretta A. Preska in Manhattan denied the preliminary injunction late Tuesday. In her ruling, Preska said Kalshi's sports contracts fall outside the Commodity Exchange Act because they do not involve a commodity price. The judge noted that the contracts settle on a yes-or-no outcome, not on a price index or delivery of a physical commodity. New York's Department of Financial Services can therefore impose its gambling oversight.

Kalshi had argued that its contracts are futures, subject to exclusive CFTC jurisdiction. The company pointed to the CFTC's 2020 order that allowed Kalshi to offer event contracts on a pilot basis. Preska rejected that reasoning. The CEA's preemption clause applies only to contracts that are "commodity interests," she wrote. Sports contracts settling on a simple binary outcome do not qualify, regardless of the CFTC's prior approval.

The ruling sets a clear boundary for how states can regulate prediction markets. New York argued that Kalshi's contracts amount to wagers on sporting events, which fall under the state's gambling code. The judge agreed. "The contracts are not a commodity interest under the Act, and the state's interest in regulating gambling is substantial," Preska wrote in her order.

Kalshi said it plans to appeal. The company's chief executive, Tarek Mansour, called the decision "a setback for innovation in regulated markets." The ruling does not affect Kalshi's non-sports contracts, such as those on economic data or political events. Those remain under CFTC oversight.

The case is Kalshi v. New York State Department of Financial Services, 25-cv-1234, in the Southern District of New York. A trial on the merits is scheduled for October. Until then, Kalshi must comply with New York's registration and reporting requirements for gambling operators. The company has 30 days to seek a stay from the Second Circuit.

Legal analysts said the ruling could encourage other states to assert jurisdiction over prediction markets. New York's action follows similar moves by regulators in New Jersey and California. The CFTC has not commented on the decision.