Judge Torres Deals Major Blow to Kalshi as New York Sports Contracts Face Scrutiny

Key Takeaways:

• In New York, Judge Analisa Torres granted denial to Kalshi’s request for a preliminary injunction.
• The court ruled that the Commodity Exchange Act (CEA) does not preempt New York gambling laws.
• The decision may embolden other State challenges to sports-event contracts.

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    Follow us on Google NewsKalshi has suffered a major setback in its lawsuit against New York regulators when Judge Analisa Torres denied its request for a preliminary injunction. The ruling then lets the case proceed to settle the state’s right to regulate gambling-related functions.

The ruling is drawing a lot of attention in crypto and prediction markets in light of one of Kalshi’s main claims to immunity: federal commodity law protects the platform from state gambling laws.

Read More: Kalshi Adds XRP Perpetuals in the U.S.

Table of Contents

• New York Wins Key Round Against Kalshi
• Court Highlights Limits of Federal Protection
  • CEA Does Not Automatically Override State Law
  • Growing Pressure on Prediction Markets

New York Wins Key Round Against Kalshi

Kalshi has claimed that its sports-event contracts fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) because they are traded within a federally regulated exchange. Judge Torres rejected that position at this stage of the case.

In the ruling, Kalshi did not present evidence that Congress could be read as clearly intending for the Commodity Exchange Act to preempt state gambling laws. The court stressed that the regulation of gambling has traditionally been a police power issue of the states.

The law employed by New York is not preempted by Federal law for Kalshi’s sports-event contracts, Torres wrote. Thus, Kalshi presented no meritorious basis for determining likelihood of success on the merits for purposes of obtaining preliminary injunctive relief.

Read More: CFTC Greenlights Kalshi’s Bitcoin Perpetual Futures, Marking Major U.S. Crypto Milestone

## Court Highlights Limits of Federal Protection

CEA Does Not Automatically Override State Law

A major theme in the ruling was that the CEA does not eliminate all state authority.

Judge Torres noted that Congress has left room for states to control some activities by including some provisions in the law, especially with regards to any gambling issues. The case also pointed to decisions from Maryland that had previously evaluated Kalshi’s preemption arguments, and those of Ohio.

The court further rejected Kalshi’s claim that compliance with New York law would conflict with federal requirements. Torres noted that nothing prevents the company from pursuing licensing options or complying with state-specific regulations.

Growing Pressure on Prediction Markets

The decision arrives as prediction markets continue expanding into areas traditionally associated with sports betting.

Legal experts believe the ruling could influence ongoing disputes in other jurisdictions, including Connecticut and additional cases within New York federal courts. Attorney Daniel Wallach described the outcome as a “major, major loss” for Kalshi.

While the case is far from over, the denial of the injunction removes an important layer of protection for the company. For now, state regulators have secured a meaningful victory in the broader debate over whether sports-event contracts should be treated as federally regulated financial products or gambling activity subject to state oversight.