A federal judge has rejected a request from prediction markets platform Kalshi to block New York State from enforcing its gambling laws, escalating a dispute over regulatory authority in the burgeoning prediction market sector.

U.S. District Judge Analisa Torres issued the ruling on Tuesday in Manhattan, concluding that the federal Commodity Exchange Act does not preempt New York’s gambling regulations as they apply to Kalshi’s contracts based on sports events. Kalshi had sought a preliminary injunction to prevent the state from taking action against its operations, arguing that federal law should govern its activities.

In her decision, Torres emphasized New York’s compelling interests in combating gambling addiction, protecting the integrity of sports, and preventing the unchecked expansion of unregulated betting markets. She determined that these concerns significantly outweigh Kalshi’s arguments regarding the primacy of federal oversight and the potential technological difficulties customers might face under state enforcement.

Kalshi has publicly declined to comment on the ruling but has indicated plans to appeal the decision. The case highlights ongoing tensions between state and federal regulators as they vie for control over the rapidly evolving prediction market industry, a sector that has drawn scrutiny amid concerns about gambling risks and regulatory gaps.

The court’s ruling asserts New York’s authority to regulate prediction markets within its borders, underscoring broader questions about how gambling laws apply to emerging financial technologies and platforms that offer event-based contracts.