Kalshi Loses Major NY Prediction Markets Ruling to Judge Torres

Federal Judge Analisa Torres denied Kalshi’s request for a preliminary injunction on July 7, 2026, allowing New York state to move forward with a gambling enforcement case against the prediction market platform’s sports-event contracts. Torres ruled from the Southern District of New York that the state’s gambling laws apply to Kalshi’s sports offerings and are not overridden by the federal Commodity Exchange Act.

It is the same judge who presided over the SEC v. Ripple Labs case involving XRP, a docket now tangled with Ripple’s pre-CLARITY Act global regulatory push. This time the docket reads KalshiEX LLC v. Williams, and the consequence is more immediate: New York’s gaming regulators are free to pursue Kalshi in state court for offering sports bets the state says are illegal.

The Ruling in SDNY

Torres issued a 22-page opinion on July 7, 2026 in KalshiEX LLC v. Williams (Case No. 1:25-cv-08846), the suit Kalshi filed in October 2025 against the New York State Gaming Commission. Kalshi had asked the court to block state enforcement while the case played out. Torres refused.

Her opinion concluded that Kalshi had not made “a clear or substantial showing that it is likely to succeed on the merits.” She held that “New York gambling laws as applied to Kalshi’s sports-event contracts are not preempted by the CEA.” The case now advances to the motion-to-dismiss stage.

The court dismissed the New York State Gaming Commission itself from the docket on Eleventh Amendment immunity grounds, but the case continues against the commission’s individual members in their official capacities, including Chair Brian O’Dwyer and Executive Director Robert Williams.

The Federal Argument Kalshi Couldn’t Win

Kalshi’s central claim was that its sports-event contracts are swaps traded on a designated contract market, putting them under exclusive oversight of the Commodity Futures Trading Commission and outside state gambling law. The argument has worked elsewhere. It did not work in front of Torres.

The court rejected all three of Kalshi’s preemption theories. On express preemption, the judge assumed without deciding that Kalshi’s contracts might qualify as swaps but found Congress did not intend to displace state gambling laws. On field preemption, she pointed to a savings clause in the CEA and a so-called Special Rule in 7 U.S.C. § 7a-2(c), a provision that lets the CFTC prohibit event contracts tied to “gaming” and “activity that is unlawful under any Federal or State law.” That rule, she wrote, “severely undercuts Kalshi’s suggestion that Congress intended to displace all state laws.”

On conflict preemption, Torres rejected Kalshi’s claim that complying with New York law would violate the CFTC’s impartial access requirements for designated contract markets. “There is nothing preventing Kalshi from obtaining a license pursuant to New York law,” she wrote.

Torres also found that Kalshi failed the remaining Winter v. Natural Resources Defense Council factors for a preliminary injunction. She held the alleged injuries were “largely monetary” and that geolocating users state-by-state was an “ordinary burden” of complying with regulation. On the balance of equities and public interest, she cited risks to individuals aged 18 to 24 as a “high-risk population for gambling addictions,” concerns over the integrity of college sports, and the state’s sovereign interest in enforcing its own statutes.

New York Had the Coalition Already Built

New York’s case was not built alone. Attorney General Letitia James joined a bipartisan coalition of 37 other attorneys general in the bipartisan amicus brief backing state gambling laws, filed in the Supreme Judicial Court of Massachusetts in support of that state’s separate lawsuit against Kalshi. That lawsuit dates to September 2025.

Prediction markets cannot ignore states’ gambling laws that are designed to protect consumers. Kalshi’s event contracts for sports are just illegal gambling by another name, and they should play by the same rules as every other licensed gambling platform.

According to the AGs’ filing, Kalshi reported in 2025 that users bet over $1 billion every month on the platform, 90 percent of which was spent on sports betting. James’s office has separately sued Coinbase and Gemini for alleged violations of New York gambling laws, a sign the state is pressing the same theory across the prediction-market and crypto-trading spaces.

A Fractured Map From Coast to Coast

The Torres decision lands on a fractured national legal picture, where Kalshi’s success depends on which courtroom hears the case. The pattern is no longer uniform.

Torres explicitly acknowledged the split, citing rulings from both sides of the debate and noting that her court was not bound by the Third Circuit’s 2-1 Kalshi injunction opinion in New Jersey. Sports betting and gaming law attorney Daniel Wallach, who broke the news of the ruling on Wallach’s breaking alert on the Kalshi ruling, called it a “major, major loss for Kalshi in the financial capital of the US, with likely knock-on effects in other cases, especially Connecticut and other SDNY lawsuits.”

The CFTC has continued to back Kalshi’s position in amicus filings and by suing several states directly, including Arizona, Connecticut and Illinois, over their attempts to regulate prediction markets.

What’s Now at Stake For Kalshi

Kalshi is reported to be pursuing a $40 billion valuation in a new funding round. The company has approached $10 billion in monthly trading volume, with sports contracts accounting for the bulk of activity. According to Pew Research Center figures cited in coverage of a separate state case, sports account for 80 percent of the wagers offered on Kalshi.

Loss of the New York market is a direct hit to those numbers. New York is also the venue for parallel Kalshi litigation against Connecticut and Illinois regulators. A loss here may strengthen those states’ hands in their own courts.

The wider 2026 scoreboard:

• The Third Circuit sided with Kalshi against New Jersey in April 2026 in a 2-1 decision
• Nevada won a temporary ban against Kalshi and Polymarket in March 2026
• Minnesota became the first state to criminalize prediction-market wagering as a felony; Kalshi told a Minneapolis federal court it has more than 90,000 users in the state and millions of dollars in open contracts, per Minnesota’s felony-level prediction markets ban lawsuit
• The CFTC, which has backed Kalshi in court and recently approved Kalshi’s first CFTC-approved US Bitcoin perpetuals, has sued several states directly, including Arizona, Connecticut and Illinois

What Comes Next for Kalshi

Kalshi has not publicly commented on the Torres ruling or indicated whether it will appeal to the Second Circuit. The Crypto Times reported that an appeal appears probable, given the stakes in New York and the likelihood of a circuit split reaching the Supreme Court.

Geofencing has been the workaround. Kalshi and Polymarket already lock users in certain states out of restricted wagers such as sports and election contracts. The Torres opinion makes that workaround look more like a permanent feature of doing business than a temporary patch.

Wallach called the Torres ruling a “major, major loss for Kalshi in the financial capital of the US.” With the Third Circuit ruling the opposite way in April 2026, the legal status of Kalshi’s sports contracts now varies by federal circuit.

Frequently Asked Questions

Who is Judge Analisa Torres?

Judge Analisa Torres is a U.S. District Judge for the Southern District of New York. She presided over the SEC v. Ripple Labs case involving XRP. She issued the July 7, 2026 ruling in KalshiEX LLC v. Williams denying Kalshi’s preliminary injunction.

Why did Kalshi sue New York?

Kalshi sued the New York State Gaming Commission in October 2025, arguing that its sports-event contracts are swaps regulated exclusively by the CFTC and therefore shielded from state gambling law. The suit sought to block New York from enforcing its gambling laws against Kalshi’s sports offerings.

What happens to Kalshi users in New York now?

With the preliminary injunction denied, Kalshi’s case proceeds to the motion-to-dismiss stage. New York’s gaming regulators are free to continue enforcement actions against the platform in state court. Kalshi users in New York may see restricted access to sports contracts as the company decides whether to geofence the state.

Will Kalshi appeal the Torres decision?

Kalshi has not publicly said whether it will appeal. The case can be appealed to the U.S. Court of Appeals for the Second Circuit. Kalshi may also seek an immediate injunction pending appeal.

Could this case reach the U.S. Supreme Court?

It is possible. The Torres decision deepens a split between the Third Circuit, which ruled in Kalshi’s favor against New Jersey in April 2026, and the SDNY and other courts that have ruled against Kalshi. A circuit split on whether prediction markets are swaps regulated exclusively by the CFTC or are subject to state gambling laws is the kind of question the Supreme Court has historically resolved.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Prediction markets are subject to evolving state and federal regulation, and outcomes of pending litigation may alter the legal status of any platform. Figures and case status are accurate as of publication on July 8, 2026.