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MANHATTAN (CN) — A New York federal judge refused to block state regulators from enforcing gambling laws against online prediction markets like Kalshi and Polymarket, finding the state regulations are not preempted by federal authority.
In her opinion and order, U.S. District Judge Analisa Torres ruled late Tuesday that Kalshi failed to show likelihood of success on the merits as it relates to the issue of preemption under the Commodity Exchange Act, denying the prediction market’s motion for a preliminary injunction that would have blocked any regulatory effort by the state.
“Gamble with our laws and you’re going to lose. Just ask Kalshi,” Democrat New York Governor Kathy Hochul wrote on social media Wednesday morning.
Kalshi, the largest federally regulated prediction market in the country, sued New York officials in October 2025, claiming jurisdictional overreach after receiving a cease-and-desist letter for purportedly offering sports gambling without a license in the Empire State.
Kalshi argued that under the Commodity Exchange Act, the federal Commodity Futures Trading Commission held exclusive jurisdiction over all event contracts traded on Kalshi’s exchange, overriding the authority of New York’s Gaming Commission.
Torres, a Barack Obama appointee, pointed to a provision in Section 2 of the Commodity Exchange Act that she says undercuts Kalshi’s preemption claims, denoting “nothing contained in th[e] section shall … supersede or limit the jurisdiction at any time conferred on … other regulatory authorities under the laws of the United States or of any state.”
That provision, Torres wrote, was evidence “Congress did not intend to regulate so broadly as to exclude all state gambling laws from regulating transactions involving swaps.”
Torres also pointed to the historical context of New York’s interest in regulating gambling through its police power.
Under New York law, any gambling enterprise that offers sports gaming, including wagering, must obtain a license from the Gaming Commission, the state agency that regulates gambling in New York.
“There is nothing preventing Kalshi from obtaining a license pursuant to New York law and establishing a category of New York market participants that does not discriminate within that New York-resident category,” Torres wrote.
Representatives from Kalshi did not immediately respond to request for comment Wednesday.
New York Attorney General Letitia James joined Hochul in a joint statement celebrating the ruling as a victory over Kalshi.
“New York’s gambling laws are designed to protect consumers. Kalshi tried to ignore them. Yesterday, they lost in court,” James and Hochul said Wednesday morning. “We will continue to hold all gambling platforms accountable to the law — and that includes prediction markets.”
The CFTC currently regulates prediction markets, and that federal oversight allows Kalshi to operate even in states where gambling is illegal.
In April 2026, the commission sued several states, including New York and Wisconsin, asserting exclusive regulatory authority over so-called “prediction market” wagering platforms, which it says fall under the jurisdiction of derivatives traded on federally regulated exchanges.
Kalshi too followed suit, bringing civil complaints against Minnesota over the state’s efforts to regulate production markets.
Several states have attempted to crack down on Polymarket and Kalshi, claiming prediction markets effectively operate casino or gambling operations in violation of state gambling laws, and have ordered them to shut down or stop operating in their states.
While customers can wager on anything, roughly 90% of Kalshi’s trading volume goes toward bets on sports, while roughly half of Polymarket’s trading is tied to sports. Kalshi said it saw more than $1 billion traded on the Super Bowl.
President Donald Trump and his family have thrown their support at the prediction market industry, which his administration has opted to regulate lightly. Trump’s social media platform, Truth Social, even launching its own cryptocurrency-based prediction market called Truth Predict in partnership with Crypto.com.
His eldest son, Donald Trump Jr., is an adviser for both Kalshi and Polymarket and an investor in the latter. He reportedly received $300,000 worth of equity in Kalshi after joining the prediction market platform as a strategic adviser in early 2025, shortly into his father’s second term in office.
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