A U.S. federal judge has denied the CFTC’s request to temporarily block New York’s enforcement action against prediction market operator Kalshi. According to a court filing, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York denied the CFTC’s request for a temporary restraining order (TRO) without prejudice.
The judge said the agency had not shown it was likely to succeed on the merits or that it would suffer immediate, irreparable harm if New York’s lawsuit continued. The filing also said the CFTC may renew its request before Judge Victor Marrero on August 7.
The decision adds to the ongoing legal dispute over whether federal or state authorities have regulatory control over event-based contracts.
Why New York is suing Kalshi
The dispute began after the New York Attorney General’s Office filed a lawsuit against Kalshi, accusing the prediction market operator of running an illegal, unlicensed gambling business in the state.
New York Attorney General Letitia James and Governor Kathy Hochul are seeking to stop Kalshi’s operations, obtain records related to customer betting activity, recover alleged gains, and impose financial penalties under state laws.
The state alleges that Kalshi’s contracts linked to sports, elections, and other real-world events function as gambling products. The lawsuit followed a cease-and-desist order issued by the New York State Gaming Commission in October 2025, which raised similar concerns over Kalshi’s activities.
Kalshi, meanwhile, maintains that its contracts are federally regulated financial derivatives listed on a CFTC-regulated exchange rather than gambling products.
Federal-State jurisdiction at the center
The case has expanded into a larger debate over whether federal commodities law overrides state gambling regulations for prediction markets.
The CFTC has also ordered former U.S. Congressman George Santos to pay over $35,000 and accept a three-year trading ban after finding that he manipulated a Kalshi prediction market contract linked to his attendance at Trump’s 2026 State of the Union address.
The CFTC and Kalshi argue that contracts traded on federally regulated exchanges fall under the agency’s exclusive jurisdiction, preventing states from taking enforcement action. New York, however, maintains that these contracts are wagers subject to state gambling laws regardless of their federal status.
The outcome of the case could have major implications for prediction markets involving elections, sports, and other real-world events, as regulators across the U.S. continue to examine the industry.
Judge Rakoff’s decision does not resolve the underlying legal dispute. Instead, it allows New York’s enforcement action against Kalshi to continue while giving the CFTC another opportunity to seek emergency relief before Judge Marrero on August 7.
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