New York Federal Judge Denies Kalshi an Injunction for Second Time This Month
Ruling comes hours after a Minnesota federal judge agreed to block temporarily a state law banning prediction markets
A federal judge in Manhattan on Monday denied Kalshi’s request for an emergency injunction in its case against New York state officials, which would have prevented state gaming regulators from taking action against the federally regulated prediction market for offering contracts on sports events in the Empire State.
It marks the second time in three weeks that U.S. District Judge Analisa Torres turned down the New York-based company’s motion for an injunction. Kalshi filed its second motion on July 15, asking for the reprieve while it appealed to the U.S. Second Circuit Court of Appeals for relief.
While the New York State Gaming Commission, whose officials are the listed defendants, opposed Kalshi’s efforts, it agreed to refrain from taking any action until this Thursday so the plaintiff could seek an injunction.
In her three-page order, Torres said Kalshi essentially used its initial filing to explain why its motion to the appeals court would succeed. She added that the prediction market operator regulated by the U.S. Commodity Futures Trading Commission asked for “something even more ‘drastic’ than a routine injunction pending appeal – it seeks the very injunctive relief that (this) court already denied.”
Torres added that her opinion did not change from the order she made on July 9.
“Defendants have laid out significant harms associated with halting their efforts to enforce state gaming regulations,” the judge wrote.
Injunction Request Already Before Appeals Court
Kalshi filed its appeal to the Second Circuit on Thursday. In that document, the prediction market claimed Torres erred in making her initial decision and that federal law takes precedence over state law.
“Without relief, Kalshi will suffer irreparable harm from being forced to choose between criminal liability under preempted state law and violation of its federal obligations, even as the CFTC seeks to enjoin New York from applying its gambling laws in a separate case,” the appellate motion stated.
The state must submit its response in the federal appeals court by Tuesday.
Federal Judge Blocks Minnesota Prediction Market Ban
While Kalshi suffered another loss in New York on Monday, it, fellow prediction market operator Polymarket, and the CFTC scored a victory earlier in the day in a Minnesota federal courtroom. The three entities sought to block a state law banning prediction markets scheduled to take effect Friday.
U.S. District Judge Katherine Menendez, in her ruling Monday, found that the CFTC demonstrated it would be likely to succeed in its case that federal law takes precedence over state statutes and that there is a likelihood that the state would seek to regulate transactions outside of its jurisdiction. She also agreed that Kalshi and Polymarket showed they faced some risk that the state law would harm their businesses, including the possibility of criminal prosecution.
Her order bars Minnesota enforcing the law while the court hears the case. However, she added in her 44-page ruling that Kalshi and Polymarket may be offering contracts that do not meet the federal guidelines for trading in an exchange.
“If they don’t fit, Plaintiffs have much weaker claims that the CFTC is the only authority that can regulate them,” she added.
The split decisions by federal judges again show the complexity of the legal battle between states and the prediction markets as well as the CFTC. It adds to the likelihood that the question of whether federally regulated prediction markets can offer contracts on sporting events will eventually be answered by the U.S. Supreme Court.
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