States beat back Kalshi's preemption defense across multiple courts
State courts have ruled against Kalshi's sports event contracts in Wisconsin, Utah, and New York, rejecting its federal preemption defense. The decisions allow states to enforce gambling bans despite Kalshi's CFTC registration. Tribal litigation is also testing whether these contracts constitute gaming under the Indian Gaming Regulatory Act. Experts expect the dispute to reach the Supreme Court for a final resolution.
Kalshi's CFTC registration is no longer a reliable shield against state gambling laws. Wisconsin, Utah, and New York have each ruled that federal registration does not preempt state enforcement, and traders in those states now face contract voiding risk if Kalshi keeps offering sports event contracts. The platform must choose between geofencing each losing state or absorbing penalties while fighting market by market.
Polymarket holds identical CFTC registration and faces identical exposure. The Second Circuit appeal is the only path to a national standard, but that court may not rule before more states file. Each new loss fragments addressable audience and multiplies legal spend. The immediate risk is whether New York moves for a preliminary injunction that halts trading while its case runs.