CFTC Loses Bid to Halt New York’s Kalshi Gambling Case

A federal judge rejected the Commodity Futures Trading Commission’s emergency attempt to stop New York from pursuing its enforcement case against prediction market operator Kalshi.

US District Judge Jed S. Rakoff denied the CFTC’s request for a temporary restraining order, and found that the regulator had not demonstrated a strong likelihood of success on the merits or a likelihood of irreparable harm.

(Source: CourtListener)

The request was denied without prejudice, which means that the CFTC can renew its motion before Judge Victor Marrero on Friday, Aug. 7.

The ruling allows New York’s case against Kalshi to continue for now. However, it does not settle the larger dispute over whether federally regulated prediction markets are derivatives exchanges or gambling platforms subject to state laws.

New York Attorney General Letitia James sued Kalshi on July 31, alleging that the company operates an illegal and unlicensed gambling business.

Announcement from the New York Attorney General

Kalshi allows users to trade contracts based on the outcomes of sporting events, elections, economic releases and other real-world events. Traders generally buy “yes” or “no” positions depending on whether they believe a particular outcome will occur.

New York argues that many of these contracts are effectively wagers because their outcomes are uncertain and outside the control of participants. State officials also allege that Kalshi has offered products resembling traditional sports bets without obtaining a New York gambling licence.

The New York State Gaming Commission even issued Kalshi a cease-and-desist order in October of 2025.

The state wants to stop Kalshi from offering the disputed contracts in New York and could also pursue penalties, restitution and the forfeiture of revenue allegedly generated through unlawful activity.

Kalshi has denied that it operates an illegal gambling platform. The company maintains that its contracts are financial derivatives traded on a market regulated by the CFTC.

The dispute is part of a much wider legal battle between prediction market operators and state regulators.

Kalshi has challenged enforcement efforts in several states, producing mixed court decisions. A federal appeals court previously sided with Kalshi in its dispute with New Jersey, finding that certain contracts were subject to the CFTC’s exclusive jurisdiction.

However, a New York federal judge reached a different conclusion after rejecting Kalshi’s request to block state enforcement. The court found that New York could apply its gambling laws to the company’s sports-related contracts.

Other states, including Massachusetts, Michigan, Nevada and Washington, have also challenged or restricted parts of Kalshi’s business.

The next major development could come on Aug. 7, when the CFTC may renew its request for emergency relief before Judge Marrero. The court will ultimately need to determine whether New York’s gambling laws can be enforced against Kalshi despite the company’s federal registration.

A victory for New York could encourage more states to require prediction markets to obtain gambling licences and follow local restrictions. A victory for the CFTC could sharply limit states’ ability to regulate event contracts offered through federally supervised exchanges.

For now, Rakoff’s ruling is a procedural setback for the CFTC rather than a final decision against Kalshi.