Appeals Court Judge Denies Kalshi an Injunction as New York Deadline Looms
New York officials could take action on or after Thursday
A federal appeals court judge on Wednesday evening denied Kalshi’s motion for an injunction that would prevent New York state officials from taking action against the prediction market as it sues the state over an order to stop offering derivative contracts on sporting events to residents.
The decision by U.S. Circuit Judge Myrna Perez with the U.S. Second Circuit Court of Appeals comes just two days after a federal district judge in Manhattan rejected Kalshi for a second time this month. Wednesday’s action also comes one day before a negotiated moratorium on New York seeking penalties from the federally regulated entity ends.
Perez’s ruling is not necessarily the last checkpoint. While she denied temporary administrative relief pending a review by a three-judge panel from the circuit, she still referred the matter to a three-judge panel. How quickly those judges may act remains to be seen.
Swap or a Bet?
Just a couple of hours earlier, Kalshi submitted its rebuttal to the state’s submission opposing an injunction from the appellate level.
In the 20-page filing, Kalshi’s lawyers argued that buying and selling contracts from an exchange regulated by the U.S. Commodity Futures Trading Commission tied to the outcome of a sporting event differs from placing a bet on the same event through a sportsbook.
“Kalshi’s event contracts, like all derivatives, are tradeable instruments on a nationwide market with prices set by market forces,” Kalshi’s response stated. “Sports bets, by contrast, are customer-to-company transactions where a bookmaker sets prices to favor itself. These contracts cannot possibly be traded on an exchange, and therefore are not swaps.”
The lawsuit between Kalshi and New York is still in the early stages, as Kalshi is seeking an order that would prevent the state from going after the prediction market for violating New York’s gambling laws while the case makes its way through the courts. So far, judges have indicated that Kalshi has not made a compelling argument that it will succeed in making its case.
On the other hand, the judges have sided with the state, which claims it and its residents face harm if Kalshi were able to continue facilitating trades of sporting event contracts in New York.
The main points made by the state are that prediction markets allow individuals as young as 18 to buy or sell contracts, while New York’s gambling laws set the minimum age for wagering through a licensed sportsbook at 21. Further, the nation’s fourth most populous state is also the largest state that has multiple licensed sportsbooks taking bets. New York generates a significant amount of tax revenue through a 51% tax on operator revenue. That total was $1.32 billion for the 2025 calendar year.
Kalshi Claims Financial Harm Without Injunction
Kalshi countered in its Wednesday filing that it would suffer significant harm if the state ordered it to block sporting event contracts through geofencing. For starters, they would be unable to compete in what is one of the country’s most lucrative markets. After all, New York City is the nation’s financial capital. New York led the country in per capita gross domestic product last year at $123,369.
Beyond that, though, Kalshi said it will likely face the same choice if banned in New York that it will face in Michigan. A state judge there allowed the officials to enforce its ban on the prediction market and, starting as of Aug. 12, fine Kalshi $120,000 a day for each day a geofencing solution is not working. Not long after that decision, the CFTC came down and ordered Kalshi not to abide by the judge’s ruling, meaning it could face federal penalties if it does block Michigan residents from trading on sports.
The prediction exchange added it would need to invest significantly to implement a geofencing solution, just like it must in Michigan and Nevada through GeoComply. Or, it would pay state fines, which it says will likely be substantial and irrevocable.
“Here, sovereign immunity would bar Kalshi from collecting damages from defendants, and defendants do not argue otherwise,” Kalshi stated.
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