Kalshi loses New York preemption fight, appeals to Second Circuit as Washington opens
A federal judge denied Kalshi's bid to block New York from enforcing its gambling laws against the platform's sports-event contracts, ruling the Commodity Exchange Act does not preempt state oversight. Kalshi is appealing to the Second Circuit. Separately, Washington state is seeking an injunction to halt Kalshi's operations there, with a hearing held March 2026. The platform also faces a Michigan court order to stop trading, which CFTC chair Mike Selig has ordered it to defy. The multi-front litigation challenges Kalshi's position that its CFTC-regulated contracts are financial instruments rather than sports wagers.
Each state court that rejects federal preemption invites parallel enforcement elsewhere, multiplying Kalshi's legal budgets and forcing geofencing decisions market by market. The platform now faces contradictory commands: Michigan courts demand it stop trading, while the CFTC orders it to continue. Traders holding contracts they understood as federally backed face sudden voiding risk from conflicting state orders.
For Polymarket, the identical exposure means every state victory against Kalshi previews its own legal trajectory. The Second Circuit appeal is where both platforms bet on restoring a single federal shield, but that court may not rule before more states act. Kalshi's back-to-back losses in New York and Washington compress the response window and turn state-by-state survival into the core strategy.
Kalshi's back-to-back losses in New York and Washington, with a Michigan court order and a CFTC command to defy it, join a widening state-level assault that already spans Illinois and New Mexico and threatens to trap the platform between federal and state courts across half a dozen jurisdictions.