- Judge Torres ruled Kalshi failed to show New York’s gambling laws are preempted by the Commodity Exchange Act.
- The court said Congress preserved state authority to regulate certain gambling-related activities alongside federal oversight.
- The ruling moves the case to the motion-to-dismiss stage after rejecting Kalshi’s preliminary injunction request.
Kalshi lost its bid for a preliminary injunction after Judge Analisa Torres ruled that New York’s gambling laws governing the company’s sports-event contracts are not preempted by the Commodity Exchange Act. The decision, issued in the Southern District of New York, allows the case to move toward the motion-to-dismiss stage, according to court filings highlighted by Daniel Wallach and journalist Eleanor Terrett.
Court Rejects Preemption Argument
Judge Torres ruled that Kalshi failed to demonstrate it was likely to succeed on the merits of its claim. The court said gambling regulation has historically fallen under state police powers. Therefore, the ruling applied a presumption against federal preemption in the dispute.
Judge Torres also found that the Commodity Exchange Act does not fully displace state authority. Instead, she wrote that Congress preserved room for states to regulate certain activities covered by federal law.
The ruling pointed to Section 2 of the Commodity Exchange Act. Although it grants the Commodity Futures Trading Commission exclusive jurisdiction in specific areas, it also preserves powers granted to state regulators.
Special Rule Played Key Role
The court also examined the Commodity Exchange Act’s Special Rule governing event contracts. Judge Torres said the provision allows the CFTC to prohibit contracts involving unlawful activity or gaming when they conflict with state or federal law.
According to the ruling, that language demonstrates Congress intended state gambling laws to continue operating alongside federal regulation.
The decision also referenced earlier Maryland and Ohio rulings involving Kalshi. Those cases similarly concluded that state gambling laws remain relevant under the federal framework.
Case Moves To Next Stage
Kalshi also argued that complying with New York law would conflict with the CFTC’s impartial access requirement. However, Judge Torres rejected that position. She said the requirement prevents discriminatory platform access but does not require exchanges to offer contracts nationwide.
The court further stated that Kalshi could obtain a New York license and create a separate category for state residents without violating federal rules.
According to Eleanor Terrett, the ruling allows the litigation to proceed to the motion-to-dismiss stage after the court declined to block enforcement of New York’s gambling laws.
