Kalshi's Same-Day Appeal Lands in Second Circuit After NY Judge Says "Not So Fast" 🏛️

Kalshi filed a same-day notice of appeal on Tuesday challenging a New York federal judge's refusal to block state gambling regulators from enforcing local laws against its sports-related event contracts. The company will take the case to the US Court of Appeals for the Second Circuit, escalating a legal fight over whether sports prediction markets are federally regulated derivatives or state-regulated gambling products.

US District Judge Analisa Torres, sitting in the Southern District of New York, denied Kalshi's motion for a preliminary injunction against officials at the New York State Gaming Commission, finding that state gambling laws, as applied to Kalshi's sports-event contracts, were not preempted by the US Commodity Exchange Act. The court said Kalshi had not made a "clear or substantial showing" that it was likely to succeed on the merits, and noted that other jurisdictions have issued split opinions on similar requests, with some granting injunctions against state enforcement and others denying them.

"Major loss for Kalshi in the nation's financial capital, with likely knock-on effects in other cases (esp. Connecticut and other SDNY lawsuits)," wrote Daniel Wallach, a Florida-based lawyer whose practice focuses on sports wagering and gaming law in the US. Kalshi's appeal adds to a widening US legal battle as prediction market platforms face mounting pressure from state regulators over their sports event contracts.

In May, the Commodity Futures Trading Commission backed Kalshi in an Ohio federal appeals court fight after the platform challenged efforts to restrict its prediction market offerings. The CFTC's filing followed its decision to sue five states, including Wisconsin, New York, Arizona, Connecticut and Illinois, to assert jurisdiction over prediction markets. On June 25, Kalshi sued Illinois officials over a state law it said "expressly bans sports event contracts" unless prediction market platforms obtain local licenses, arguing the measure usurped the CFTC's authority over federally regulated derivatives markets. Kalshi's June trading volume topped $9B as World Cup-fueled interest in prediction markets surged.

State regulators have also moved against other platforms, with Wisconsin suing Robinhood, Coinbase, Polymarket, Crypto.com, and Kalshi in April over sports event contracts, alleging the platforms facilitated illegal sports betting, while Nevada regulators have pursued similar actions against prediction market firms including Kalshi, Coinbase, and Polymarket.