A federal judge has rejected the prediction market platform Kalshi's attempt to operate outside of New York's gambling regulations. U.S. District Judge Jesse M. Furman ruled that the Commodity Exchange Act (CEA), which governs derivatives, does not preempt New York's authority to regulate gambling activities.

Furman's decision hinges on the CEA's provision that its exclusive jurisdiction over swaps on a designated contract market does not supersede state regulatory powers. The judge found no clear intent from Congress to preempt state gambling laws, particularly given that gambling regulation is a traditional state police power. She stated it is not impossible for Kalshi to comply with both federal and New York laws.

This ruling is part of a larger legal battle across various U.S. courts concerning the intersection of federal derivatives law and state gambling regulations for prediction markets. Conflicting decisions from different circuit courts suggest the Supreme Court may eventually need to weigh in on federal versus state jurisdiction in this evolving space.