Judge rejects CFTC bid to halt New York action against Kalshi

Judge Jed S. Rakoff denied without prejudice the Commodity Futures Trading Commission’s emergency request for a temporary restraining order that would have paused New York’s enforcement action against Kalshi. Rakoff wrote the CFTC had not shown a high likelihood of success on the merits or a likelihood of irreparable harm, and he noted the agency may renew the request before Judge Victor Marrero on Aug. 7.

New York Attorney General Letitia James filed suit last Friday, accusing Kalshi of operating an illegal, unlicensed gambling business by offering contracts tied to sports, elections and other events. The New York State Gaming Commission issued a cease-and-desist order against Kalshi in October 2025.

The dispute centers on whether federal commodities law preempts state gambling enforcement when event-based contracts are traded on exchanges overseen by the CFTC. New York officials allege the contracts are wagers subject to state gambling laws and licensing requirements. The CFTC and Kalshi maintain the contracts are derivatives and fall under the agency’s exclusive jurisdiction.

Kalshi runs online markets where users buy and sell contracts whose payoffs depend on the outcomes of real-world events. The CFTC has asserted authority over certain event contracts that resemble commodity derivatives and asked the court to block the state suit on the grounds that federal law displaces inconsistent state regulation.

Rakoff’s denial without prejudice leaves the CFTC able to renew its application in front of Judge Marrero. If the agency pursues relief again, the court will need to decide whether federal preemption applies and whether the CFTC is likely to prevail on the merits of its claim.

The case will determine whether state gambling statutes or federal commodities law govern similar event-driven contracts offered on trading platforms. Further proceedings are expected to clarify which regulators have primary authority over those products.