By Jonathan Stempel
NEW YORK, July 8 (Reuters) – A federal judge denied Kalshi’s bid to block New York from enforcing its gambling laws against the prediction markets platform, amid a growing battle between federal and state regulators over authority to police the fast-growing industry.
In a decision on Tuesday, U.S. District Judge Analisa Torres in Manhattan said Kalshi did not deserve a preliminary injunction, because the federal Commodity Exchange Act did not supersede New York’s gambling laws as applied to Kalshi’s sports-event contracts.
Torres also said New York’s interests in preventing gambling addiction, preserving sports’ integrity and avoiding a proliferation of unregulated contracts “heavily” outweigh Kalshi’s interests in ensuring the primacy of federal law and that customers don’t face “intractable” technology issues.
“Kalshi has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits,” Torres wrote. Other federal courts are divided on the issue, she added.
A lawyer for Kalshi declined to comment. Kalshi appealed Torres’ decision to the federal appeals court in Manhattan.
In a joint statement on Wednesday, New York’s Governor Kathy Hochul and Attorney General Letitia James welcomed the decision.
“New York’s gambling laws are designed to protect consumers,” they said. “We will continue to hold all gambling platforms accountable to the law – and that includes prediction markets.”
CFTC CLAIMS ‘EXCLUSIVE’ OVERSIGHT
The U.S. Commodity Futures Trading Commission rejects New York’s view, citing what Chairman Michael Selig has called its “exclusive” jurisdiction over commodity derivatives markets, including prediction markets.
Prediction markets such as Kalshi and Polymarket let people wager on the outcome of events such as sports and elections.
They have surged in popularity since the 2024 U.S. presidential election, when their real-time probabilities proved more accurate than polling in predicting Republican Donald Trump’s victory over Democrat Kamala Harris.
Kalshi sued New York last October, after the state’s gaming commission ordered it to stop offering unlicensed sports event contracts.
New York filed lawsuits on April 21, accusing Coinbase Financial Markets and Gemini Titan of promoting gambling through their own event contracts.
The CFTC sued New York three days later, and last month said it has challenged similar regulatory activity in Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, Rhode Island and Wisconsin.
(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)
