Kalshi Loses Bid for Emergency Relief as Prediction-Market Dispute Moves Toward Second Circuit

A federal judge in Manhattan has declined to shield Kalshi from New York enforcement of state gambling laws while the company pursues an appeal, adding to the legal uncertainty surrounding prediction-market platforms. On July 27, U.S. District Judge Analisa Torres denied KalshiEX LLC's request for an emergency injunction pending appeal in KalshiEX LLC v. Williams. The three-page order leaves Kalshi's appeal intact and does not resolve the underlying case. It simply refuses temporary protection from state action during the appellate process. Kalshi filed its appeal to the Second Circuit (case no. 26-1835) after Torres rejected the company's July 7 motion for a preliminary injunction. In that earlier decision, she said the Commodity Exchange Act (CEA) likely does not preempt New York's gambling laws as applied to Kalshi's sports-event contracts. Torres said the bar for an injunction pending appeal is higher than for a standard preliminary injunction. She found Kalshi still failed to meet the four-factor test and cited no extraordinary circumstances that would justify a different result. The court described Kalshi's claimed risk to its federal registration as "speculative" and treated anticipated compliance costs as mainly monetary, which typically does not amount to irreparable harm. Kalshi argued that a proposed CFTC rule issued in June supports explicit CEA preemption of state laws regulating transactions on CFTC-registered exchanges, and it would set standards for event contracts tied to gaming, unlawful conduct, war, terrorism and assassination. Torres did not invalidate the proposal. She emphasized that courts must independently interpret statutes under the Supreme Court's Loper Bright decision and reiterated her view that the CEA does not displace every state gambling law covering transactions resembling swaps. The CFTC's public comment period closed July 27, and the proposal has not been finalized. The dispute sits amid a widening split among federal courts. In April, the Third Circuit ruled 2–1 that New Jersey could not regulate Kalshi's sports-event contracts, concluding they fall within the CFTC's exclusive jurisdiction. Other courts, including in New York and in several states, have taken a narrower view of federal preemption. The divide broadened again on July 27, when a Minnesota federal judge temporarily blocked that state's ban on prediction markets, finding certain Kalshi and Polymarket contracts likely meet the federal definition of swaps. States such as Washington, by contrast, have succeeded in blocking Kalshi's sports contracts under state gambling laws. Separately, the CFTC has sued multiple states, contending that federally registered exchanges should operate under a single national derivatives framework. Next, the Second Circuit will rule on Kalshi's emergency bid for temporary relief. If that request is rejected, New York can continue enforcement while the appeal proceeds on the merits, including whether the CEA preempts state gambling restrictions. The CFTC may still revise or finalize its prediction-market proposal after reviewing comments, though it has not provided a timeline. For crypto and prediction-market operators, the case underscores the unresolved clash between state gambling regimes and federal derivatives oversight. Until courts or regulators establish a clearer nationwide standard, platforms face a state-by-state patchwork that could constrain products or drive expensive compliance changes.