On Friday, July 31, 2026, New York filed a lawsuit against Kalshi, accusing the prediction market platform of running an illegal gambling operation in violation of state laws. The lawsuit claims Kalshi operates in “flagrant disregard” of Empire State regulations by failing to obtain a license from the New York State Gaming Commission and evading related taxes. Additionally, the state argues Kalshi violates laws prohibiting sports betting for individuals under 21, as the platform permits users aged 18 and older.

New York Governor Kathy Hochul stated, “Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules.” She emphasized that the state is taking action to halt the illegal behavior and bring Kalshi into compliance.

The lawsuit seeks a court order to bar Kalshi from operating in New York without a gaming license, require the company to pay restitution to users, forfeit any illegal gains, and impose fines equivalent to three times its profits. It also requests penalties of $100,000 for each offer or attempt to offer unlicensed sports betting.

New York Attorney General Letitia James described prediction markets like Kalshi as “gambling platforms, plain and simple,” underscoring the state's position. She highlighted the importance of gambling laws in protecting children from underage betting and combating gambling addiction.

Kalshi disputes the allegations, maintaining that its event contracts are federally regulated derivatives outside the scope of state gaming laws. Elisabeth Diana, Kalshi's Head of Communications, told ABC News, “States can’t just shut down a federally licensed exchange.” Kalshi also warned that shutting down the platform could drive New Yorkers to offshore markets.

The Commodity Futures Trading Commission (CFTC), which asserts exclusive jurisdiction over prediction markets, filed for a temporary restraining order to halt New York's lawsuit.

This legal action follows similar suits filed by New York against cryptocurrency firms Coinbase and Gemini earlier in the year, accusing them of operating unlicensed gambling through their prediction market sites. The potential penalties for Kalshi could reach an estimated $36 billion.

Sources