Ripple’s Case Judge Torres Just Dealt a Major Blow to Kalshi

Judge Analisa Torres, the federal judge who presided over the landmark Ripple case, is back at the center of another major legal battle. This time, she is presiding over a case involving Kalshi, the regulated event‑contract exchange.

On July 7, 2026, Judge Torres denied Kalshi’s motion for a preliminary injunction in the Southern District of New York. The ruling allows the case to proceed to the motion‑to‑dismiss stage after she found that New York’s gambling laws, as applied to Kalshi’s sports event contracts, are not preempted by the Commodity Exchange Act (CEA).

This is a major loss for Kalshi in the financial capital of the United States, with likely knock‑on effects in other cases, particularly in Connecticut and other SDNY lawsuits.

The Ruling: States Have the Right to Regulate Gambling

Judge Torres’s ruling hinged on the principle of federal preemption. Kalshi argued that the CEA’s grant of exclusive jurisdiction to the Commodity Futures Trading Commission (CFTC) preempted New York’s gambling laws. Torres rejected that argument.

She wrote: “Courts apply a presumption against preemption with respect to areas where states have historically exercised their police powers. That assumption applies with particular force when Congress has legislated in a field traditionally occupied by the states.”

She added: “The scope of laws regulating gambling and lotteries is clearly a matter of predominantly state concern.”

Torres cited the Maryland and Ohio rulings against Kalshi, which reached similar conclusions. She found that the CEA’s text and structure, as well as the historical context of New York’s interest in regulating gambling, demonstrate that Congress did not intend to preempt all state actions that may relate to designated contract markets (DCMs).

The Special Rule and Congressional Intent

Torres pointed to the “Special Rule” in the CEA, which grants the CFTC authority to prohibit event contracts that are “contrary to the public interest” because they involve “activity that is unlawful under any Federal or State law” or “gaming.”

She wrote: “The Special Rule’s plain text clearly reflects an affirmative intent to preserve state laws governing whether particular conduct is lawful or unlawful.”

Torres also noted that Congress expressly authorized the CFTC to prohibit particular categories of transactions based on the fact that the conduct at issue would violate state law. This provision, she said, “severely undercuts Kalshi’s suggestion that Congress intended to displace all state laws.”

She further cited Senator Blanche Lincoln, who stated during the Dodd‑Frank Act debates that the purpose of the Special Rule was to “prevent the creation of futures and swaps markets that would allow citizens to profit from devastating events.” Lincoln specifically mentioned sporting events like the Super Bowl, the Kentucky Derby, and the Masters Golf Tournament as examples of contracts that “would not serve any real commercial purpose” but “would be used solely for gambling.”

Read also: Bitcoin $100K Before 2027? Kalshi Traders Say Odds Are…

Kalshi’s Arguments Rejected

Kalshi also argued that complying with New York gambling laws would conflict with the CEA’s impartial access requirement. Torres dismissed this argument.

She wrote: “The purpose of the impartial access requirement is to prevent DCMs from having certain discriminatory access requirements for their platform; it does not require DCMs to offer contracts nationwide.”

She noted that there is nothing preventing Kalshi from obtaining a license under New York law and establishing a category of New York market participants that does not discriminate within that category.

Torres concluded: “Although complying with New York gambling laws imposes an additional regulatory requirement on Kalshi, that requirement is not squarely contrary to federal law. Kalshi’s attempt, therefore, to avoid that requirement is unavailing.”

What This Means for Kalshi and the Prediction Market Industry

This ruling is a significant setback for Kalshi. The company has been fighting multiple state-level challenges to its sports event contracts. The SDNY is a critical jurisdiction, and a loss there could embolden other states to pursue similar actions.

The ruling also underscores a broader legal reality: states retain significant authority over gambling regulation, even when federal agencies like the CFTC have jurisdiction over the underlying contracts.

For the prediction market industry, this decision reinforces the need for a clear federal framework that addresses preemption issues. Without one, event‑contract exchanges will continue to face a patchwork of state regulations.

Our Take

Judge Torres is no stranger to high‑profile crypto cases. Her ruling in the Ripple case established that XRP sold on public exchanges was not a security. Now she has delivered another significant ruling, this time affirming state authority over gambling regulation.

Kalshi’s legal challenges are far from over. The case will now proceed to the motion‑to‑dismiss stage. But the denial of the preliminary injunction is a clear signal that the court views state gambling laws as a legitimate and enforceable constraint on event‑contract exchanges.

For Kalshi, the path forward is uncertain. The company may need to seek legislative solutions or negotiate state‑by‑state compliance. For the broader industry, this ruling is a reminder that federal regulation does not always preempt state authority – especially in areas where states have historically exercised their police powers.

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