Jul 09, 2026 14:38:00

Judge rejects prediction market Kalshi's attempt to invalidate gambling laws.

Prediction markets, which use the outcome of any event as the subject of betting, are

gaining influence . Prediction markets such as Polymarket and Kalshi claim that gambling and prediction markets are separate things, but access has been blocked in Spain and Minnesota in the United States due to gambling regulations, and Kalshi was sued in Arizona for operating a gambling business without a license. Similarly, New York State ordered Kalshi to stop sports-related transactions, but Kalshi sued the court to have this order overturned. However, it has been revealed that the U.S. District Court for the Southern District of New York, which was handling the case, dismissed Kalshi's lawsuit.

Statement from Governor Kathy Hochul and Attorney General Letitia James | Governor Kathy Hochul | New York State
https://www.governor.ny.gov/news/statement-governor-kathy-hochul-and-attorney-general-letitia-james-1

Judge rejects Kalshi attempt to override New York state gambling laws - Ars Technica
https://arstechnica.com/tech-policy/2026/07/new-york-can-restrict-sports-gambling-on-prediction-markets-us-judge-rules/

The prediction market Kalshi is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM) .

However, the New York State Gaming Commission , which is responsible for regulating gambling in New York State, raised concerns that Kalshi was managing sports-related betting, which is regulated under the state's gambling laws, and ordered Kalshi to cease sports-related transactions in October 2025. The New York State Gaming Commission argued that Kalshi's provision of sports-related betting could potentially harm young people, particularly those between the ages of 18 and 24.

In response, Kalshi appealed to the U.S. District Court for the Southern District of New York to invalidate the New York State Gaming Commission's order. Kalshi argued that the transactions it offers are 'swap transactions, not gambling,' and that they should be regulated by the CFTC, not the state. It claimed that the CFTC has exclusive authority over swap transactions, and that it is unfair for the state to regulate Kalshi while ignoring that authority.

However, Judge Analysa Torres, who was presiding over the case, dismissed the appeal.

Regarding this ruling, New York Governor Kathy Hoeckle and Attorney General Leticia James issued a joint statement saying, 'New York State's gambling laws were enacted to protect consumers. Kalshi attempted to disregard gambling laws but lost in court yesterday. We will continue to call on all gambling platforms to comply with the law, including prediction markets.'

Judge Torres explained the decision by saying, 'Congress did not intend to preempt all possible state actions related to DCM. Rather, the Commodity Exchange Act (CEA) leaves room for states to regulate incidental issues that may arise from swap transactions and other financial instrument transactions in DCM.' He further explained that New York State's gambling regulations 'do not contradict, but rather complement, federal law.'

However, the CFTC is more lenient towards prediction markets than New York State, and has sued the state to overturn laws that ban or regulate the markets. Both Kalshi and Polymarket are trying to address the regulations by hiring Donald Trump Jr. as an advisor.

Kalshi has also notified the Second Circuit Court of Appeals that he intends to appeal.