Kalshi just lost a crucial fight in the Southern District of New York (SDNY), and the ruling could echo across other cases. Judge Analisa Torres denied the prediction market’s request for a preliminary injunction against New York’s gambling regulators, keeping state enforcement in place.
In her order, Judge Torres said New York’s gambling laws do apply to Kalshi’s sports-event contracts. She ruled that those state rules are not preempted by the federal Commodity Exchange Act (CEA), which Kalshi argued should control. Because of that, she found that Kalshi had not made the “clear or substantial showing” needed to establish that it is likely to prevail.
Importantly, the court stressed that gambling regulation is a traditional state police power. Torres wrote that she would not read the CEA’s grant of exclusive federal jurisdiction as leaving “no room for supplementary state legislation.” She also noted that nothing prevents Kalshi from seeking a license under New York law rather than bypassing the state framework.
Why the SDNY Ruling Is a Major Setback for Kalshi
This case sits in the financial capital of the US, so losing there hurts Kalshi badly. The company hoped a strong SDNY win would support its view that federal derivatives rules override state gambling laws. Instead, Torres’ ruling adds to decisions rejecting that preemption theory and confirming states can still police sports-style betting.
The order also allows New York to continue treating Kalshi’s sports-event contracts as unlicensed gambling while the case continues. The lawsuit now enters the motion-to-dismiss phase rather than granting Kalshi early protection. Observers say this raises legal risk for similar offerings in Connecticut and for other SDNY-linked cases that use the same federal arguments.
Kalshi has already seen mixed results elsewhere. Courts in Nevada and New Jersey granted preliminary injunctions in its favor, but judges in Maryland and Massachusetts ruled against the company and questioned its preemption claims. New Jersey even cited the Massachusetts decision as evidence that Kalshi’s push to “federalize” the gaming industry should be rejected.
Because Judge Torres also handled the high-profile SEC v. Ripple case, her name carries extra weight in crypto and derivatives circles. Her reasoning here may guide future battles over prediction markets and event contracts, especially for sports products that look like betting to state regulators. Kalshi can still appeal to the Second Circuit, but this New York ruling is a clear setback for its nationwide legal strategy.
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