“On what grounds could it be appealed to the US Supreme Court since it is a NY State matter?”
How do you believe cases progress to the USSC?
Sure, some are Federal but most are State.
I have a relative who argued three cases (Montana) in front of the USSC and all three were state issues - nothing involved with the US Government or Federal statutes at all.
I’d also say because the state is relying on federal law for which they have no jurisdiction