District Court Denies Kalshi's Bid to Block New York Gambling Laws

The U.S. District Court for the Southern District of New York denied Kalshi's motion for a preliminary injunction to stop the state from enforcing its gambling laws against Kalshi's sports-event contracts while the litigation proceeds.

Kalshi operates a federally licensed prediction market under the Commodity Exchange Act. Its sports-event contracts allow users to take positions on, among other things, game outcomes. New York's Gaming Commission classified those products as unlicensed sports gambling. Kalshi sued and sought to bar the state from enforcing its gambling laws pending a final decision.

Kalshi argued that the CFTC's exclusive jurisdiction over designated contract markets fully preempts state gambling law. New York asserted that gambling regulation is a traditional state power that Congress did not intend to eliminate.

The court rejected the three preemption theories Kalshi advanced:

• On express preemption, the court found that while the CEA grants the CFTC exclusive jurisdiction, it also contains savings clauses preserving other state and federal regulatory authority. That textual balance, the court said, reflects a deliberate congressional choice to leave states room to act.
• On field preemption, the court pointed to the CEA's "special rule," which authorizes the CFTC to prohibit certain contracts precisely because they violate state law. A statute that incorporates state law as a regulatory trigger, the court reasoned, cannot simultaneously be read to erase it. The court also applied the presumption against preemption in areas where states have historically held primary authority, such as gambling.
• On conflict preemption, the court found no impossibility. Kalshi could obtain a New York gambling license and comply with both regulatory regimes, the court said. The court found that the added cost and burden of doing so does not rise to the level of legal impossibility that conflict preemption requires.

Kalshi failed on all four factors required for preliminary relief. The court found (i) no likelihood of success on the merits, given the weakness of the preemption arguments, (ii) no irreparable harm because Kalshi's claimed injuries, principally fines and compliance costs, are monetary and fully compensable if Kalshi ultimately prevails, (iii) that the balance of equities favored New York, whose interest in protecting residents from unlicensed gambling outweighed Kalshi's interest in avoiding state oversight, and (iv) that enjoining a state from enforcing its own laws would itself disserve the public interest.

The court dismissed the New York State Gaming Commission as a defendant on 11th Amendment grounds. The case will proceed against the individual commissioners in their official capacities.

This ruling resolves only the preliminary injunction. The merits of the preemption dispute remain open.