Key Takeaways
- Judge Torres, of SEC v. Ripple fame, denied Kalshi’s injunction, ruling New York gambling laws aren’t preempted by federal law.
- The ruling lands amid Kalshi’s $33 billion June volume, fueled partly by World Cup sports contracts.
- Courts remain split nationally: Kalshi has won in New Jersey and Tennessee but lost in Maryland, Nevada, and Arizona.
Judge Analisa Torres, the SDNY judge whose SEC vs. Ripple rulings shaped years of crypto regulatory debate, is now the center of a different fight over federal preemption, this time in prediction markets.
In a ruling filed July 7 in KalshiEX LLC v. Williams, Torres denied Kalshi’s request for a preliminary injunction against the New York State Gaming Commission, finding that New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the Commodity Exchange Act, and that Kalshi had not made a clear showing it was likely to succeed on the merits.
Torres Rejects the Federal Shield Argument
Torres wrote that the Commodity Exchange Act (CEA) still allows states to regulate certain issues arising from trading on Designated Contract Markets (DCMs). Because gambling regulation falls within traditional state police powers, she declined to interpret the CEA’s grant of exclusive jurisdiction as precluding state legislation.
She added that nothing prevents Kalshi from obtaining a license under New York law, calling the company’s attempt to avoid that requirement “unavailing.”
On irreparable harm, Torres held that Kalshi’s alleged injuries were largely monetary and that geolocating users state by state was an ordinary compliance burden, while siding with New York on the public interest, given risks to 18-to 24-year-olds considered a high-risk population for gambling addiction.
Attorney Daniel Wallach called it a major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects in Connecticut and other Southern District of New York (SDNY) lawsuits, and Kalshi has already appealed to the Second Circuit.
FIFA World Cup Boom Collides With a Widening Legal Patchwork
The timing sharpens the stakes. Kalshi posted a $31 billion June trading record amid the 2026 FIFA World Cup, with monthly volume reaching $33 billion, still well ahead of Polymarket‘s roughly $14 billion. World Cup-driven sports contracts are precisely the product category now caught in state gambling enforcement.
New York is one front in a fractured national map. Kalshi has won preliminary injunctions in New Jersey, where they were affirmed by the Third Circuit in April, and in Tennessee, but has lost in Maryland, Nevada, Arizona, and the Sixth Circuit.
Minnesota passed a law in May making it a felony to operate or participate in prediction markets starting August 1, prompting the CFTC to sue the state within 24 hours and Kalshi to file its own suit days later.
The CFTC has now sued at least nine states, including Arizona, Connecticut, Illinois, New York, New Mexico, Minnesota, Rhode Island, Wisconsin, and Kentucky.
Rival Polymarket faces the same split. Nevada’s Gaming Control Board separately secured a preliminary injunction blocking Polymarket’s operations, and both platforms now navigate a shifting state-by-state legal landscape.
What Comes Next
Torres explicitly acknowledged the fractured landscape, citing rulings on both sides and noting her court was not bound by the Third Circuit’s contrary conclusion, a signal that a circuit split heading toward the Supreme Court is increasingly likely.
New York Attorney General Letitia James’s office is now expected to file a civil enforcement action against Kalshi in state court seeking restitution, disgorgement, and civil penalties.
For an industry riding a record World Cup volume, the legal question defining its next year is no longer whether prediction markets are popular, but which courts get the final word on whether they’re gambling.
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Dr. Guneet Kaur is a senior editor at CCN.com and a Science Fellow at Exponential Science. She is a fintech and blockchain expert with extensive experience in digital finance education, blockchain ecosystems, and cryptocurrency markets. She has worked with global media such as Cointelegraph, as well as education and blockchain platforms, to design and lead strategic content and learning initiatives. As an educator and assessor for top-tier executive programs, she bridges real-world fintech trends with academic insight.
Dr. Kaur is also a published researcher and peer reviewer across fintech and data science journals, including Financial Innovation Journal and International Journal of Big Data Intelligence and Applications. Her work spans data-driven analysis, Web3 innovation, and technical content development. With a strong foundation in both industry and academia, she translates complex financial technologies into practical applications, empowering learners, professionals, and institutions across the rapidly evolving digital finance landscape.
