New York sues Kalshi over alleged illegal gambling operation

New York sues Kalshi in a Manhattan state-court case filed on July 31, alleging the prediction-market operator runs an unlicensed gambling business. The state is seeking injunctive relief, restitution and penalties that officials have estimated could reach $36 billion, though that figure is neither a judgment nor an amount found to be owed.

Governor Kathy Hochul and Attorney General Letitia James say Kalshi accepts wagers in New York without registration with the New York State Gaming Commission. The complaint characterises the company’s contracts as gambling under state law because their outcomes are uncertain, outside a user’s control or depend on chance, according to reporting by CNBC and the Associated Press.

Kalshi offers contracts tied to the outcome of events. Users can trade positions on subjects including sports, elections, culture and other developments; the state’s allegations place particular emphasis on sports-related offerings, while also challenging other categories of contracts.

Why is New York suing Kalshi?

New York alleges that Kalshi has not obtained a state gaming licence, has avoided taxes paid by licensed casinos and mobile sports-betting operators, and permits access for users aged 18 to 20. State law requires customers to be at least 21 for mobile sports betting, the suit says.

James said New York’s gambling laws are intended to curb underage betting and problem gambling. Hochul said Kalshi had disregarded the state’s gaming rules. Those are allegations in an unresolved case, rather than judicial findings.

The requested relief includes an order stopping the alleged unlawful conduct in New York, forfeiture of purported illegal gains, restitution for consumers and fines, including a penalty equal to three times the gains alleged by the state. CNBC reported that the state also seeks a $100,000 penalty for each attempt to offer sports wagering. State filings put the combined potential damages and costs at about $36 billion, according to CNBC and the Associated Press.

Who regulates prediction markets?

The suit forms part of a wider contest between state gambling authorities and the Commodity Futures Trading Commission. Kalshi and other platforms maintain that their contracts are federally regulated transactions and that the CFTC has exclusive authority. They say participants trade with one another, with prices set by market activity and the platform charging a trading fee.

States take a different view, particularly where contracts concern sport. Their position is that these products amount to sports betting, which remains subject to state licensing, tax and consumer-protection rules.

Kalshi called New York’s action political theatre and said a state could not close a federally licensed exchange. The CFTC has also challenged state enforcement measures, arguing that federally registered platforms fall within its jurisdiction, CNBC reported.

The dispute follows an October 2025 order from New York’s Gaming Commission directing Kalshi to stop operating what it described as an unlicensed mobile sports-wagering platform. Kalshi then brought a federal case against the commission that remains pending. A federal judge earlier denied Kalshi’s requests for preliminary injunctive relief against the commission, CNBC reported.

New York separately filed an April case against Coinbase and Gemini over prediction-market activity. The Kalshi litigation now adds a large potential claim to a developing national test of the boundary between federal derivatives oversight and state gambling law.

This story draws on original reporting from Finextra Research.