Judge who was Ripple's savior, this time 'strikes down' Kalshi...New York gambling law applied

▲ Kalshi, Prediction Market, Lawsuit/AI Generated Image

Judge Analisa Torres of the U.S. District Court for the Southern District of New York, who presided over the Ripple lawsuit, has denied Kalshi's request for a preliminary injunction. Kalshi's argument to avoid New York State gambling laws was not accepted by the court.

According to CoinGape, a cryptocurrency specialized media outlet, on July 8 (local time), Judge Torres denied Kalshi's application for a preliminary injunction against New York State. The court ruled that New York State gambling laws could be applied to Kalshi's sports-related event contracts.

Kalshi argued that its sports-related event contracts are CFTC-regulated swaps and are traded on designated contract markets (DCMs). It also argued that the Commodity Exchange Act (CEA) preempts state gambling laws. The court did not accept Kalshi's application, and the lawsuit will continue.

New York Attorney General Letitia James's office has opposed Kalshi's argument that federal regulations preclude the application of state gambling laws. CoinGape reported that James's office is expected to file a civil enforcement lawsuit against Kalshi in New York State court. Claims may include restitution, disgorgement of ill-gotten gains, civil penalties, and injunctive relief.

Daniel Wallach, an attorney specializing in sports betting and gaming law, called it “a very big defeat for Kalshi in the financial center of the United States.” Wallach analyzed that it could also affect the Connecticut case and other ongoing lawsuits in the U.S. District Court for the Southern District of New York. He also raised the possibility that prediction market operators might need to obtain a New York State license or restrict local operations.

Kalshi and Polymarket face lawsuits and regulatory actions in several states regarding event contracts. The U.S. District Court in Minnesota also agreed with the state's argument that prediction market operators have significantly exceeded Congress's intent when creating the CFTC framework in 1974. Kalshi can appeal Judge Torres's decision and request an immediate injunction again during the appeal period.

[Key Summary of the Article]

-Judge Torres, who handled the Ripple lawsuit, denied Kalshi's request for a preliminary injunction.

-The court ruled that New York State gambling laws could be applied to Kalshi's sports-related event contracts.

-Kalshi can appeal the ruling and request an injunction again during the appeal period.

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