This has little to do with NY governing NY. NY was attempting to govern Kalshi in other states, which it doesn't have the authority to do.

Most people invoke the "states' rights" platitude when the federal government oversteps on constitutional matters that haven't been specifically legislated. In this case, Congress already passed a law regulating these activities, and it seems pretty clear-cut that Kalshi engages in interstate commerce, so New York will likely lose if this gets to the Supreme Court.

That's not to say I think event prediction markets are good. In fact, I think they should be banned. That doesn't change my analysis of the current situation.