New York sues Kalshi as illegal gambling case widens

New York sued KalshiEX, LLC in state Supreme Court in Manhattan, accusing the prediction-market platform of running an illegal gambling operation and asking a judge to stop it from operating in the state. Governor Kathy Hochul and Attorney General Letitia James announced the case.

In its press release, the attorney general’s office said Kalshi launched in 2021 as a service that let users bet money on future events, then added sports trading in 2025 and promoted it as legal sports betting available to Americans in all 50 states. The office said its investigation concluded that Kalshi’s prediction market was an illegal, unlicensed gambling operation.

New York says Kalshi’s contracts amount to gambling because users are wagering on uncertain outcomes outside their control or on events that hinge on chance. James called prediction markets “gambling platforms, plain and simple,” and said the state was acting to protect New Yorkers.

The lawsuit says Kalshi failed to obtain a licence from the New York State Gaming Commission. It also says the company sidestepped taxes paid by licensed casinos and mobile sports-betting platforms, reducing revenue that supports public schools, youth sports and problem-gambling education and treatment.

New York also says Kalshi’s markets are open to users aged 18 to 20, even though state law requires people to be at least 21 to place mobile sports bets. Hochul said the state’s gaming laws exist to protect consumers, prevent problematic gambling, deliver funding for public services and ensure companies play by the same rules.

The state is asking the court to order Kalshi to stop operating as an unlicensed gambling business, forfeit all illegal gains, pay restitution to harmed users and pay fines equal to three times its gains. In a court filing, New York put a rough estimate of damages and costs at $36 billion.

The dispute comes amid a wider fight over who regulates prediction markets. Kalshi and other platforms say they are federally licensed and that the Commodity Futures Trading Commission has exclusive authority over their contracts, while states argue that the business is really sports betting.

That fight had already reached federal court in New York. In a July opinion, Judge Analisa Torres denied Kalshi’s bid for a temporary restraining order and preliminary injunction against state enforcement of gambling laws, saying New York’s rules as applied to Kalshi’s sports-event contracts were not pre-empted by federal law.

The state had ordered Kalshi to stop operating an unlicensed mobile sports-wagering platform in October 2025, and Kalshi later sued to block enforcement. In April, the federal government also sued Connecticut, Arizona and Illinois over their attempts to regulate prediction-market operators.