Kalshi loses emergency injunction bid in federal court

U.S. District Judge Analisa Torres denied KalshiEX's request for an emergency injunction pending appeal on July 27 in KalshiEX LLC v. Williams.
Summary

• Judge Analisa Torres denied Kalshi emergency relief while its Second Circuit appeal remains pending separately.
• Kalshi failed to show strong appellate prospects, irreparable harm, favourable equities, or public interest support.
• The court independently read federal law and declined to defer to the CFTC's proposed interpretation.

The Southern District of New York also rejected Kalshi's alternative request for short-term administrative relief. The three-page order does not dismiss Kalshi's appeal or resolve the underlying lawsuit. It only denies protection from New York enforcement while the appellate dispute continues.

Kalshi appealed after Torres denied its preliminary-injunction motion on July 7. That earlier ruling found that the Commodity Exchange Act likely does not preempt New York gambling laws as applied to Kalshi's sports-event contracts. The appeal was filed with the Second Circuit as case number 26-1835.

Kalshi emergency injunction failed a higher legal test
An injunction pending appeal requires a stronger showing of likely success than an ordinary preliminary injunction. Torres said Kalshi had not met any of the four factors in the earlier proceeding and had not identified unusual circumstances that justified reversing that result.

Kalshi argued that it faced a choice between violating New York law or complying with the state and risking its federal registration. Torres found the alleged registration risk speculative. She also said the expected compliance costs were largely monetary and generally did not qualify as irreparable harm.

The CFTC proposal did not bind the court
Kalshi pointed to the CFTC's June proposed rule, which states that the Commodity Exchange Act expressly preempts state laws regulating transactions on CFTC-registered exchanges. The Commission also proposed standards for reviewing event contracts involving gaming, unlawful conduct, war, terrorism and assassination.

Torres did not invalidate or formally reject the proposed rule. Instead, she said courts must independently interpret statutes under the Supreme Court's Loper Bright decision. She maintained her earlier view that the Commodity Exchange Act does not displace every state gambling law governing transactions involving swaps. The proposal's public-comment period closed on July 27, but it is not a final rule.

A separate Second Circuit request remains unresolved
The district-court denial is separate from Kalshi's emergency request at the Second Circuit. New York regulators urged the appeals court on July 27 to deny that request. As of the latest available reporting, no Second Circuit order resolving the emergency motion had been published.

The appellate court can now decide whether to grant temporary relief and later review Torres's July 7 preemption analysis. The underlying lawsuit has not been finally decided. As previously reported, the July 7 ruling left New York free to apply its gambling laws unless an appellate court intervenes.

Conflicting rulings leave prediction-market law unsettled
Federal courts have reached different conclusions on the jurisdiction question. In April, the Third Circuit ruled 2-1 that New Jersey could not regulate Kalshi's sports-event contracts because they fell within the CFTC's exclusive jurisdiction. Courts in New York and several other states have taken a narrower view of federal preemption.

The split widened on July 27 when a Minnesota federal judge temporarily blocked that state's direct prediction-market ban. The judge found that several Kalshi and Polymarket contracts likely met the federal definition of swaps, while warning that later relief could cover fewer products. In related coverage, crypto.news examined the platforms' widening state-by-state legal battle.

Kalshi has also faced restrictions elsewhere. Washington judge blocked its sports contracts under state gambling law. The CFTC, meanwhile, has sued multiple states and continues to argue that federally registered exchanges should operate under one national derivatives framework.

The next immediate event is the Second Circuit's decision on Kalshi's emergency motion. After that, the court will consider the merits of the appeal, including whether New York's laws are preempted. The CFTC may also revise or finalise its prediction-market proposal after reviewing comments, but it has announced no deadline for a final rule.