Judge Who Ruled XRP Not a Security in Ripple Case Hands Kalshi ‘A Major, Major Loss’ in New York

Key Takeaways

• Judge Torres denied Kalshi’s injunction, ruling NY gambling laws aren’t preempted by the Commodity Exchange Act.
• The decision breaks with the Third Circuit’s April 2026 ruling that shielded Kalshi from New Jersey regulators.
• Kalshi posted a record $31 billion in June volume, raising the stakes as the case heads to motion-to-dismiss.

Another Major Ruling From Torres

Image source: XThe denial allows the case to proceed to the motion-to-dismiss stage, leaving the exchange without the legal shield it has won in several other states. Gaming law attorney Daniel Wallach described the outcome bluntly, calling it “a major, major loss.” He added that the ruling could carry implications for Kalshi’s other pending cases, including in Connecticut.

The Ripple Judge Takes on Prediction Markets

Torres previously presided over the U.S. Securities and Exchange Commission’s (SEC) long-running lawsuit against Ripple, issuing the landmark 2023 decision that XRP sales on exchanges did not constitute securities transactions, a framework that echoed through U.S. policy until regulators formally recognized XRP’s non-security status in landmark crypto rules this March.

Her latest ruling lands in KalshiEX LLC v. Williams, the case Kalshi filed in the Southern District of New York on October 27, 2025. The exchange sued New York days after the state’s Gaming Commission sent a cease-and-desist order demanding it stop offering sports-based event contracts to New Yorkers without a sports wagering license.

Kalshi argued that its contracts trade on a federally designated exchange overseen exclusively by the Commodity Futures Trading Commission (CFTC), placing them beyond state regulators’ reach. New York agreed not to enforce the order while the injunction motion was pending.

Torres was unpersuaded that federal law displaces the state’s gambling statutes at this stage. That finding does not end the case and Kalshi can still prevail on the merits or appeal. However, it strips the exchange of interim protection and hands state regulators their most significant courtroom win yet in the Second Circuit.

A Deepening Judicial Split

The decision sharpens a divide among federal courts given that in April, the Third Circuit affirmed a preliminary injunction blocking New Jersey regulators from enforcing state gaming law against Kalshi, with the appeals court reasoning that the CFTC’s jurisdiction over exchange-traded event contracts is likely exclusive. Maryland, by contrast, denied Kalshi’s mirrored request, and Torres has now added New York to the states where preemption arguments have faltered.

Kalshi posted a record $31 billion in trading volume in June, fueled by a World Cup betting boom, even as more states move toward felony-level enforcement against unlicensed sports wagering. The prediction market sector as a whole pushed monthly taker volume to $8.6 billion back in April, with Kalshi overtaking rival Polymarket for the top spot.