In a significant development for the future of prediction markets, a New York judge has denied an emergency request from the Commodity Futures Trading Commission (CFTC) to block the state’s ongoing enforcement action against Kalshi. The ruling ensures that New York’s legal campaign against the platform remains fully active for the time being.
Judge Jed S. Rakoff issued the decision, denying the CFTC’s motion for a temporary restraining order without prejudice. Rakoff noted that the federal agency failed to demonstrate a high likelihood of success on the merits of their argument, nor did they prove that allowing the state’s case to proceed would cause irreparable harm.
The Core Conflict: Federal Derivatives vs. State Gambling Laws
At the heart of this legal battle is a fierce jurisdictional tug-of-war. Last Friday, New York Attorney General Letitia James filed a lawsuit against Kalshi, accusing the platform of operating an unlicensed and illegal gambling operation. This follows a cease-and-desist order previously issued by the New York State Gaming Commission in October 2025. State authorities firmly believe that Kalshi’s event contracts—which allow users to wager on outcomes related to sports, elections, and other real-world events—are straightforward gambling products subject to state law.
On the other side of the aisle, Kalshi and the CFTC argue that these event contracts are actually financial derivatives. Because Kalshi operates as a CFTC-regulated exchange, both the platform and the federal commission maintain that these trades fall under the exclusive jurisdiction of federal commodities law, which they argue should wholly preempt state-level gambling enforcement.
What’s Next for Kalshi and the CFTC?
While this initial ruling is a setback for the CFTC, the legal fight is far from over. Because Judge Rakoff denied the motion without prejudice, the door remains open for the federal regulator to try again.
According to the order, the CFTC has the opportunity to renew its request for a temporary restraining order later this week. The agency may present its case before Judge Victor Marrero on Friday, August 7, where they will once again attempt to prove that federal authority should overrule New York’s gambling regulations. Until then, Kalshi remains squarely in the crosshairs of New York’s state prosecutors.
