Federal judge upholds New York's authority to regulate sports prediction markets

A federal court has sided with New York in a high-stakes dispute over whether states can regulate prediction markets, ruling that Kalshi—a CFTC-registered platform—cannot escape state gambling laws through federal registration alone.

US District Judge Analisa Torres rejected Kalshi's bid to block enforcement of New York's gambling restrictions, determining that the Commodity Exchange Act does not preempt state regulators from overseeing the industry. Kalshi has signaled it will appeal to the Second Circuit Court of Appeals.

The regulatory divide#

Kalshi operates as a designated contract market under the Commodity Futures Trading Commission, which oversees derivatives trading. The company argued this federal status exempts it from New York's gambling laws. Torres disagreed, holding that "Congress did not intend to preempt all state actions that may relate to DCMs" and that states retain authority over matters "tangential" to federal jurisdiction.

The decision reflects a widening gap between regulators. The CFTC has been comparatively permissive toward prediction markets and has even sued states seeking to block restrictions. By contrast, New York and other states have moved to tighten oversight.

What's next#

Governor Kathy Hochul and Attorney General Letitia James issued a joint statement affirming that "New York's gambling laws are designed to protect consumers" and promising to enforce them uniformly across all gambling platforms, prediction markets included.

The case is one of several working through the courts on the same core question: whether federal derivatives oversight can override state consumer protections. As Kalshi pursues its appeal, the outcome may shape how aggressively states can regulate a fast-growing industry with major venture capital backing—including advisors connected to the Trump family.