Judge allows states to geofence prediction markets

A federal judge in Manhattan denied KalshiEX LLC’s request for a preliminary injunction on July 7, allowing New York gaming regulators to enforce state gambling law against the company’s sports-event contracts and to require geolocation-based access controls while the Commodity Futures Trading Commission finalizes national rules for event contracts. The decision came from Judge Analisa Torres of the U.S. District Court for the Southern District of New York.

The court rejected KalshiEX’s argument that the Commodity Exchange Act preempts state gambling enforcement as applied to its event contracts. The opinion found that the costs and operational burdens of implementing state-by-state geolocation controls amount to ordinary regulatory compliance and do not meet the standard for irreparable harm needed for immediate federal injunctive relief. The ruling addresses only the preliminary injunction request; KalshiEX may continue to pursue its underlying claims on the merits in the ongoing litigation.

The order arrived as the CFTC advances a federal framework for prediction and event contracts. The agency published proposed rules on June 12 and set a public-comment deadline in late July for proposed public-interest determinations that would cover event contracts, including those tied to sporting events.

Practically, the court’s order leaves states able to require platforms to block or limit access to event contracts within their borders. The opinion noted that geolocation and venue-by-venue controls can be expensive and disruptive to a single national market model, but treated those costs as foreseeable compliance burdens rather than grounds for immediate federal relief. Platforms therefore face simultaneous state enforcement and federal rulemaking while the agency completes its process.

Some trading venues already operate under mixed regimes: several firms have pursued or received CFTC designations for contract markets, and other platforms restrict access in particular states. One major provider does not offer its prediction markets in Nevada. Regulatory records show at least one affiliate has obtained a CFTC-designated contract market license, and the agency’s designated-contract-market list includes a U.S. operator doing business under a known market name.

The order binds KalshiEX’s New York case during the pendency of the litigation and clarifies that state gambling law may be enforced alongside federal commodity law at this stage. The CFTC’s final rulemaking and any later judicial rulings will determine whether federal standards ultimately limit or replace state-by-state access requirements.