Kalshi Suffers Federal Court Loss In New York
Kalshi is already appealing to a higher court. Roundup: North Carolina governor signs budget that is good for prediction markets; three Senate Democrats have questions for Kalshi.
Kalshi suffered a setback in federal court in its home state of New York.
The US district court for the Southern District of New York denied Kalshi’s request for a temporary restraining order and preliminary injunction against New York gaming regulators. It means New York can move forward, for now, with enforcing its gambling laws against Kalshi’s sports event contracts.
Kalshi has already informed the district court that it is appealing the ruling to the Court of Appeals for the Second Circuit.
From the opinion and order:
For the reasons explained below, the Court finds that New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA [Commodity Exchange Act] and Kalshi has not, therefore, made a clear or substantial showing that it is likely to succeed on the merits. …
Courts apply “a presumption against preemption with respect to areas where states have historically exercised their police powers.” N.Y. SMSA Ltd. P’ship, 612 F.3d at 104; see Altria Grp., 555 U.S. at 77 (“When addressing questions of express or implied pre-emption, we begin our analysis with the assumption that the historic police powers of the States [are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress. … That assumption applies with particular force when Congress has legislated in a field traditionally occupied by the States.” (citations and internal quotation marks omitted). “The scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern.” …
Moreover, given that the power to regulate gambling is a traditional police power exercised by New York, the Court also declines to interpret the CEA’s grant of exclusive jurisdiction as leaving “no room for supplementary state legislation.”
That’s certainly not the end of legal wrangling here:
Full opinion and order:
While all of this will eventually be decided by judges in higher courts — and perhaps ultimately the Supreme Court — it’s still a bad outcome for Kalshi as it tries to advance its legal arguments nationwide.
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📊 The Ticker for Monday, July 6
Kalshi Volume: $1.56 billion
Sports + parlays: 85.7% of volume
Crypto markets: 12.4% of volume
Trend line and breakdown from Ticker Tracker:
Prediction markets news roundup
🚨The important stuff
North Carolina Increases Sports Betting Tax Rate, Implements New Prediction Market Tax in Newly Signed Budget (Sports Betting Dime): “North Carolina Gov. Josh Stein (D) today signed his first state budget into law, officially legalizing the nearly $34 billion spending plan. With his signature, North Carolina increases its sports betting tax rate for all licensed operators, institutes a new prediction market tax, allows North Carolina gamblers to deduct losses on their taxes, and changes the disbursement of sports betting tax revenues for state colleges.”
🔍 I don’t blame the prediction market industry for getting this in the budget. It’s very good for them! I do blame North Carolina lawmakers for making a pretty massive policy decision with no discussion and at the last minute.
Economic Hit Men for Gambling Apps (The American Prospect): “For political purposes, the mere presence of a former Biden official’s name matters far more than anything else. The Prelogar brief allowed Kalshi’s head of legal counsel Robert DeNault to tweet that gambling law immunity ‘is not a D versus R issue.’ Plausible claims to bipartisanship are the oil that D.C. runs on. Hiring out of the revolving door is a key way to supply it.”
Kalshi Co-founders Are Hedging Their Bets on 2026 Midterms (NOTUS): “Kalshi co-founders Tarek Mansour and Luana Lopes Lara want you to bet on everything — but the duo is personally hedging their bets on whether Republicans or Democrats will win control of Congress in the 2026 midterm elections.”
“Mansour and Lopes Lara have together donated about $1 million to federal political campaigns and political action committees this election cycle, according to a NOTUS analysis of federal campaign finance records. They’re contributing to a broad range of Democratic and Republican campaigns — many of the candidates they’ve contributed to are involved in prediction market regulation in Congress.”
⚖️ Legal and regulatory news
Warren, Schumer, Wyden Investigate Whether Key Trump-Affiliated Companies Scored Get-Out-of-Jail-Free Cards From Corrupt IRS Settlement (press release): U.S. Senator Elizabeth Warren (D-Mass.), Minority Leader Chuck Schumer (D-N.Y.), and Senator Ron Wyden (D-Ore.), Ranking Member of the Senate Finance Committee, investigated whether key companies with Trump family ties scored get-out-of-jail-free cards from President Donald Trump’s corrupt settlement with the Treasury Department (Treasury) and the Internal Revenue Service (IRS). The lawmakers sent letters to the Trump Organization, World Liberty Financial, Powerus, 1789 Capital, Kalshi, Polymarket, Foundation Future Industries, Tag Air, American Bitcoin, Kaz Resources, and Trump Media and Technology Group.
From the letter to Kalshi:
Dear Mr. Mansour:
We write to request information regarding your company’s understanding of the applicability of the settlement that President Trump and the Department of Justice (DOJ) entered into in May 2026. There are significant questions about the validity of this agreement,1 but on its face it could give not only the President and his family a broad and valuable get-out-of-jail-free card for any financial crimes or misconduct: it may also protect a more expansive group of entities — including your company — solely because of ties to the President or his family.
In January 2026, President Trump, his sons Eric Trump and Donald Trump Jr., and the Trump Organization sued the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) over leaks of their tax information that occurred during the President’s first term in office.2 Despite a judge raising concerns about the validity of this lawsuit,3 as well as ethics concerns reportedly raised by government attorneys,4 in May 2026, DOJ announced an out-of-court settlement that appears to bar Treasury and IRS from auditing or otherwise pursuing any civil or criminal enforcement actions against the plaintiffs and all businesses “affiliated” with them.5 Such enforcement actions could include investigations or prosecutions of a broad array of financial crimes, including tax crimes, that fall under Treasury’s and IRS’s purview. …
Given that Donald Trump Jr. is a “strategic advisor” to Kalshi,10 your company could be sufficiently “related or affiliated”11 to the plaintiffs to receive broad immunity from audits, civil penalties, and federal prosecution for any financial crimes prosecutable by Treasury or IRS under the settlement agreement. The public deserves transparency about the scope of this get-out-of-jail-free card for Trump-aligned businesses, and about whether you intend to rely on this settlement as a free pass for any possible violations of the law.
Congressman Johnson, Judiciary Democrats Urge Judicial Conference to Ban Prediction Market Participation for the Federal Judiciary (press release): “Today, Rep. Jamie Raskin, Ranking Member of the House Judiciary Committee, and Rep. Hank Johnson, Ranking Member of the Subcommittee on Courts, Intellectual Property, Artificial Intelligence, and the Internet, sent a letter to the Honorable Robert J. Conrad Jr., Director of the Administrative Office of the U.S. Courts, urging the Judicial Conference to prohibit federal judges, clerks, and judicial staff from participating in online prediction markets.
“Federal officials in all three branches of government often have advance knowledge of, if not direct influence or control over, the prospective outcome of a wager related to public policy events and decisions. It is no surprise that, in this setting, prediction markets appear rife with insider trading and other abuses,” wrote the Ranking Members.
South Korea opens hearing process in Polymarket gambling review (Crypto News): “According to the Broadcasting, Media and Communications Review Committee, it has decided to hear Polymarket’s position before ruling on whether to issue a corrective request against the platform. The committee said the additional step would allow it to verify both the legality of the service and the way it operates before reaching a final conclusion.”
“Under South Korea’s National Gambling Control Commission Act, an illegal gaming business includes online services that facilitate speculative gambling, giving authorities the power to monitor and respond to such activities.”
Two traders sue Polymarket over disputed resolution of Strategy bitcoin sale market (The Block): “Two plaintiffs have filed a complaint against Polymarket alleging breach of contract and deceptive practices in the resolution of a prediction market tied to whether Strategy would sell bitcoin by May.”
“The lawsuit, filed by William Wood and Thomas Bush in the New York Supreme Court on July 3, names Polymarket, CEO Shayne Coplan, CMO Matthew Modabber, and other related entities and individuals as the defendants.”
“According to the filing, the plaintiffs held ‘Yes’ shares in a binary market asking whether Strategy would sell any of its bitcoin holdings by May 31.”
Ban on City Employees From Using Private Info in Prediction Markets Advances (WTTW): “Chicago employees would be banned from using private information to place bets on prediction markets like Polymarket and Kalshi under a measure that won the endorsement of a key City Council committee Tuesday.”
“The City Council’s Ethics and Government Oversight Committee voted unanimously to advance a measure crafted by Ald. Timmy Knudsen (43rd Ward) that would amend the city’s Governmental Ethics Ordinance to ban employees from using insider information to bet on prediction markets.”
CFTC’s First Event-Contract Insider Trading Lawsuit Challenged Over Whether Polymarket Trades Were Swaps (DeFi Rate): “Attorneys for Gannon Ken Van Dyke previewed a planned motion to dismiss in a July 6 pre-motion letter. The lawyers argue the CFTC lacks authority because the trades at issue were “geopolitical bets,” not swaps covered by federal commodities law.”
Prediction market tax proposal to return in fall, NJ Assembly speaker says (New Jersey Monitor): “A proposal to tax prediction markets that did not clear floor votes in either legislative chamber before lawmakers broke for their customary summer recess will return along with legislators come the fall, Assembly Speaker Craig Coughlin (D-Middlesex) told the New Jersey Monitor.”
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📣 Industry news
Pro Padel League announces multiyear partnership with Kalshi (press release): The Pro Padel League (PPL) - the world’s leading professional padel league - today announced a multiyear partnership with Kalshi, the world’s largest prediction market.
As the Official Prediction Market Partner of the PPL, Kalshi will offer fans the opportunity to trade on the outcome of PPL games. Kalshi’s partnership with the Pro Padel League brings prediction markets to life through a series of immersive fan and VIP activations, including exclusive pro clinics and co-branded giveaways. These activations are designed to drive Kalshi brand awareness and new customer acquisition by engaging the PPL’s affluent, passionate fanbase at the intersection of sport and prediction trading. They also strengthen awareness of the PPL’s matches, teams, and players, while providing fans with a new way to engage with the world’s fastest-growing racquet sport.
The PPL’s partnership with Kalshi builds on an earlier collaboration between the two for the 2025 PPL’s City’s Cup Final which took place at the Hammerstein Ballroom in New York City last October. This landmark partnership named Kalshi the main sponsor of the event, with in-venue signage, broadcast integration of live odds and digital placements on Kalshi’s platform.
“We are incredibly excited to partner with the Pro Padel League,” said Adam Barrick, Head of Sports Partnerships at Kalshi. “We know how fast the sport is growing and we’ve seen how passionate padel fans are. Our partnership with the PPL will allow us to showcase the power of prediction markets, while offering fans a new way to enjoy and engage with the league throughout the season.”
📖 Everything else you should know/read
Texas Medical Association proposes age limit on prediction markets to prevent gambling ‘addiction’ (KERA News): “An association of Texas doctors wants state lawmakers to implement more regulations and safeguards on “prediction market platforms” that pediatricians say contribute to gambling addictions. …
“Basically, you have a situation right now where high school seniors are legally walking around with Vegas in their pockets,” said Dr. Lindy McGee, an assistant professor at Baylor College of Medicine and the former chair of the Child and Adolescent Health Committee for TMA. “They can bet on just about anything.” …
In a statement, TMA said it is calling for a minimum age of 21 years to participate in prediction markets
UPDATE: Kalshi, CNBC, and CNN respond (Popular Information): All three responses had one thing in common: they argued that Kalshi prediction markets are newsworthy, like other data included in journalism. CNN said that Kalshi data is “a complement to other reporting and data sources.” CNBC said that Kalshi data is “part of the broader set of market indicators.” Kalshi said, “in a world of echo chambers and clickbait, wisdom-of-the-crowd data can add additional context and perspective.”
This raises the question: if this data is being featured because of its news value, why does Kalshi need to pay CNN and CNBC to feature it?
Banning state-regulated sports betting doesn’t stop sports betting:
Kalshi Takers Lose Record $32 Million, Mostly To Market Makers, On Mexico-England World Cup Game (InGame): “England’s win over Mexico Sunday was — by some distance — the worst outcome in Kalshi history for takers, who lost more than $32 million betting on who would advance, and the best game ever for market makers. The third-worst game for takers occurred Monday, as the U.S. lost to Belgium and market makers reaped further profits.”
Straight to the Point:
⏱️ Day nine of asking for more than one CFTC commissioner
This is day nine of me asking the Trump administration to appoint more commissioners and at least one Democrat:
