Kalshi Just Lost In Federal Court — The Judge Who Ruled Against It Handled The Ripple Case Too

On Tuesday, Kalshi lost a significant court battle after Judge Analisa Torres — best known for presiding over the Ripple Labs securities case — denied the prediction market exchange a preliminary injunction in the Southern District of New York. 

Torres ruled that New York’s gambling laws are not overridden by federal commodity trading regulations as applied to Kalshi’s sports event contracts, sending the case to the motion-to-dismiss stage.

The Case Behind Tuesday’s Ruling 

The New York case has its roots in October 2025, when the New York State Gaming Commission sent Kalshi a cease-and-desist letter ordering the platform to stop offering sports-event contracts in the state, alleging it was operating without the required state gambling license. 

Kalshi responded by filing a federal lawsuit against the Gaming Commission, arguing that as a federally licensed derivatives exchange regulated by the Commodity Futures Trading Commission (CFTC), its event contracts are financial instruments governed by federal law — not state gambling statutes. 

The CFTC itself later sued New York state separately, contending that state officials were improperly interfering with a federally regulated exchange. Tuesday’s ruling is the latest development in that federal case. 

Why Judge Torres Sided With New York Over Kalshi 

The core legal question before the court was whether the Commodity Exchange Act — the federal law that gives the CFTC exclusive jurisdiction over certain derivatives markets — effectively supersedes state gambling laws when it comes to Kalshi’s sports contracts. Kalshi argued it does. 

Judge Torres disagreed. She applied what courts call a presumption against preemption — a legal principle that when federal law touches an area states have traditionally regulated, courts require clear evidence that Congress intended to displace state authority before assuming it did. 

Gambling regulation, she found, falls squarely in that category. “The scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern,” she wrote, and that presumption applies with particular force in this case.

A separate provision called the Special Rule further supported her conclusion. Under that rule, the CFTC has authority to prohibit event contracts that are contrary to the public interest because they involve conduct unlawful under any federal or state law, or involve gaming. 

Torres read that provision as affirmatively preserving state laws — if Congress had intended federal commodity law to wipe out state gambling regulation entirely, it would not have built in a mechanism that references state law as a basis for federal action.

A Growing List of States Saying No 

The ruling also addressed Kalshi’s argument that complying with New York gambling laws would force it into conflict with a separate federal requirement that derivatives exchanges provide impartial access to all market participants. 

The company argued that limiting its services to New York residents who meet state licensing requirements would constitute discriminatory access. Torres rejected that reading. 

The impartial access requirement, she explained, exists to prevent exchanges from discriminating within a group of participants — it does not require exchanges to serve every person in every state. 

Because the company failed to demonstrate it was likely to succeed on the preemption argument, the standard required for a preliminary injunction was not met. The ruling cited similar decisions against Kalshi from courts in Maryland and Ohio, reinforcing that Torres is not the first judge to reach this conclusion.

Kalshi has been fighting similar cases against state regulators across the country — in New Jersey, Nevada, Massachusetts, Tennessee, and Arizona. 

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