Good news for people who dislike the gambling-ification of seemingly everything in America: Kalshi could be in trouble. Last week, a federal judge ruled against the leading prediction market, determining the State of New York has the authority to regulate sports betting on the website, even up to the point of banning it altogether. Outright prohibition would be a serious blow for Kalshi as it tries to expand amid the loose regulatory environment of the Trump administration; as much as 80 percent of Kalshi’s business is sports related.

New York is now one of around 20 states fighting to rein in Kalshi, arguing with some success that its sports “contracts” violate states’ rights to enforce their own gambling laws. With so many cases in the courts at the moment, there is speculation that the matter will eventually end up before the Supreme Court. I spoke with Daniel Wallach, gaming lawyer and University of Miami School of Law professor, about what Kalshi’s latest legal setback means for the future of the company and of gambling in the U.S.

Can you explain what happened in New York last week?Judge Analisa Torres’s ruling recognizes that state gaming laws are not preempted by federal law.

Kalshi’s argument is that the Commodity Futures Trading Commission has exclusive jurisdiction over the regulation of swaps and that only the CFTC can regulate swap transactions. And the crux of Kalshi’s argument is that sports-event contracts should be classified as swaps because the outcome of sporting events has some level of financial consequence. Both Congress and the Supreme Court have long recognized state regulatory authority over gambling, and it takes something considerably more than a plausible textual reading of the definition of a swap to persuade the court that it was the intent of Congress to oust state regulators from the field of sports gambling.........

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